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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2006-19




Hans-Werner Wohltmann, Roland Winkler




Anticipated Raw Materials Price Shocks and Monetary Policy Response - A New Keynesian Approach
Abstract The paper analyzes the dynamic effects of anticipated raw materials price increases for small open oil-dependent economies and investigates the consequences of several monetary policy rules in response to commodity price shocks. Based on a calibrated New Keynesian open economy model the analysis shows that anticipated increases in the price of oil will involve oil-dependent economies both in temporary inflation and deflation as well as vin output expansion and contraction. Compared to an interest rate Taylor rule a money growth rule is more appropriate to reduce the volatility of the CPI inflation rate whereas just the opposite holds for stabilizing the output gap.

Keywords: Oil price shocks, Monetary Policy, Open Economy

JEL classification: E32, E52, F41, Q43




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