Do Capital Flows Matter for Monetary Policy Setting in Inflation Targeting Economies?

摘要

The aim of this study is to determine if capital flows can account for the international effectson domestic monetary policy, using an augmented Taylor rule model. In addition to the standarddeterminants of nominal interest rates, we include capital flow measures to show how central banksconsider this important factor when deciding on the most appropriate monetary policy. Using a panelof inflation targeting economies and the dynamic panel approach, this study finds that capital inflowsand outflows are an important determinant of nominal interest rates.