Stay updated with breaking news from Policy simulation. Get real-time updates on events, politics, business, and more. Visit us for reliable news and exclusive interviews.
Should monetary policy independence be maintained when the exchange rate is fixed under closed capital account conditions in a small open economy? In this study, we simulate the impossible trinity condition during 1989 to 2019 on the Nepalese economy that restricts capital flows and fixes the exchange rate with India. We modify the traditional Taylor rule based on the monetary policy reaction function to characterize Nepal's economic conditions more closely. The state–space model simulation shows that the policy trilemma does not hold in Nepal, such that the model can predict interest rate when the weight for domestic conditions is assigned at a substantially lower level. Therefore, the existing policy mix may need to be revisited to maintain monetary policy independence. Nepal might consider devaluing its currency to neutralize the adverse effects of the negative risk premium and ameliorate the real exchange rate appreciation in the short run and explore alternative arrangement ....
Swakopmund, Namibia, 16 September 2022 (ECA) -The ECA collaborating with UN Namibia and the Government of the Republic of Namibia convened a workshop on Macroeconomic Modelling for Forecasting and Policy Simulation, towards Economic Transformation and the Acceleration of the SDGs in for Namibia on 13 – 16 September 2022, in Swakopmund Namibia.Speaking on behalf of the ....