Description

This paper develops a new macrofinance model for small open economies, allowing the investigation of Mauritius's experience with 'inflation targeting lite' as described in Stone (2003). It finds that this monetary policy regime has been associated with a general reduction in inflation, principally through a reduction in inflation expectations. The credibility the Bank of Mauritius has established with its 'inflation targeting lite' regime has allowed it to shift from an emphasis on exchange rate targeting towards inflation targeting. By estimating a model in which the yield curve is modeled explicitly we are able to obtain estimates of inflation expectations.

Taxonomy

Economic policy , Monetary policy

More publications in this series: Working Papers

More publications by: James Y. Yao ; Nathaniel John Porter