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Contributors working at the International Monetary Fund present 14 chapters on the development of monetary policy over the past quarter century through the lens of the evolution of inflation-forecast targeting. They describe the principles and practices of inflation-forecast targeting, including managing expectations, the implementation of a forecasting and policy analysis system, monetary operations, monetary policy and financial stability, financial conditions, and transparency and communications; aspects of inflation-forecast targeting in Canada, the Czech Republic, India, and the US; and monetary policy challenges faced by low-income countries and how inflation-forecast targeting can provide an anchor in countries with different economic structures and circumstances.
Monetary policy. --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Banks and Banking --- Finance: General --- Inflation --- Money and Monetary Policy --- Production and Operations Management --- Price Level --- Deflation --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Policy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Macroeconomics: Production --- General Financial Markets: Government Policy and Regulation --- Macroeconomics --- Banking --- Monetary economics --- Finance --- Currency --- Foreign exchange --- Inflation targeting --- Central bank policy rate --- Output gap --- Prices --- Monetary policy --- Financial services --- Production --- Real interest rates --- Interest rates --- Banks and banking --- Economic theory --- Financial services industry --- Canada
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Using panel quantile regressions for 11 advanced and 10 emerging market economies, we show that the conditional distribution of GDP growth depends on financial conditions, with growth-at-risk (GaR)—defined as growth at the lower 5th percentile—more responsive than the median or upper percentiles. In addition, the term structure of GaR features an intertemporal tradeoff: GaR is higher in the short run; but lower in the medium run when initial financial conditions are loose relative to typical levels, and the tradeoff is amplified by a credit boom. This shift in the growth distribution generally is not incorporated when solving dynamic stochastic general equilibrium models with macrofinancial linkages, which suggests downside risks to GDP growth are systematically underestimated.
Banks and banking --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Finance --- Financial institutions --- Money --- Finance. --- Finance: General --- Macroeconomics --- Money and Monetary Policy --- International Business Cycles --- Monetary Growth Models --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: Government Policy and Regulation --- Financial Markets and the Macroeconomy --- Monetary economics --- Growth-at-risk assessment --- Credit booms --- Credit --- Financial sector risk --- Macrofinancial linkages --- Financial sector policy and analysis --- Financial risk management --- Financial services industry --- United States
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