Monetary policy choices in emerging market economies: the case of high productivity growth.(Report) From: Journal of Money, Credit & Banking | Date: March 1, 2008| Author: Ravenna, Federico; Natalucci, Fabio M. | COPYRIGHT 2008 Ohio State University Press. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group.Copyright information

We develop a general equilibrium model of an emerging market economy where productivity growth differentials between tradable and non-tradable sectors result in an equilibrium appreciation of the real exchange rate-the so-called Balassa-Samuelson effect. The paper explores the dynamic properties of this economy and the welfare implications of alternative policy rules. We show that the real exchange rate appreciation limits the range of policy rules that, with a given probability, keep infla...

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