Inflation, Credibility, and the Role of the International Monetary Fund PDF Download
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Author: Mr.Carlo Cottarelli
Publisher: International Monetary Fund
ISBN: 1451969333
Category : Business & Economics
Languages : en
Pages : 26
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Book Description
This paper argues that many developing countries may find it difficult to buttress disinflation programs purely through the adoption of traditional credibility-enhancing devices (such as monetary anchors and central bank independence), owing to “technical problems” (for example, high instability of money demand, increased capital mobility) and an insufficient endowment of credibility in the political institutions. In these cases, borrowing credibility from an outside agency like the International Monetary Fund may be the most effective solution. The paper discusses the different options that would allow the Fund to support programs aimed not at external adjustment—the Fund’s traditional role—but at disinflation.
Author: Mr.Carlo Cottarelli
Publisher: International Monetary Fund
ISBN: 1451969333
Category : Business & Economics
Languages : en
Pages : 26
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Book Description
This paper argues that many developing countries may find it difficult to buttress disinflation programs purely through the adoption of traditional credibility-enhancing devices (such as monetary anchors and central bank independence), owing to “technical problems” (for example, high instability of money demand, increased capital mobility) and an insufficient endowment of credibility in the political institutions. In these cases, borrowing credibility from an outside agency like the International Monetary Fund may be the most effective solution. The paper discusses the different options that would allow the Fund to support programs aimed not at external adjustment—the Fund’s traditional role—but at disinflation.
Author: Pierre-Richard Agénor
Publisher: International Monetary Fund
ISBN: 1451850921
Category : Business & Economics
Languages : en
Pages : 43
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Book Description
The paper examines the role of credibility in the conduct of exchange rate policy in developing countries, The analysis is based on a model in which policymakers are concerned about inflation and external competitiveness. Price setters in the nontraded goods sector of the economy adjust prices in reaction to anticipated fluctuations in the domestic price of tradable goods. This type of model is showm to generate a “devaluation bias” which undermines the credibility of a fixed exchange rate. The effect of reputational factors, signaling considerations, and joining a currency union as possible solutions to this bias is examined.
Author: Mr.Timo Valila
Publisher: International Monetary Fund
ISBN: 1451841744
Category : Business & Economics
Languages : en
Pages : 17
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Book Description
The specific role of central bank independence in determining the overall credibility of monetary policy is addressed in this paper. It is argued that the credibility of delegating monetary policy to an independent central bank is endogenous to the credibility of the inflation target because a “conservative” inflation target may not be compatible with the fiscal policy stance. Also, lack of transparency in designing the institutional set-up is shown to be welfare-reducing.
Author: Mr.Carlo Cottarelli
Publisher: International Monetary Fund
ISBN: 9781557756442
Category : Business & Economics
Languages : en
Pages : 108
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Book Description
During the last 25 years, monetary practice in most countries has increasingly been characterized by the attempt to achieve credibility of purpose while expanding the freedom of monetary authorities in controlling policy instruments. Thus, the world has moved toward monetary frameworks in which, through appropriate institutional devices, a better trade-off between credibility of goals and flexibility of instruments could be achieved. This attempt, surveyed in this paper, has taken many forms, depending on the countries economic, institutional, and cultural specificities.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1451958501
Category : Business & Economics
Languages : en
Pages : 28
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Book Description
This paper focuses on the role of debt maturity in managing the government’s incentives to use opportunistic inflation to reduce the ex post real value of its nominal liabilities. The maturity structure of government debt is shown to be a powerful instrument to affect the time profile of the inflation tax base and, hence, to mitigate the distortions introduced by time inconsistency on taxation policies. The nature of the optimal policy is shown to be heavily dependent on the type of precommitment enjoyed by policymakers.
Author: Marcus Hay MILLER
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 13
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Book Description
Author: Anna Nordstrom
Publisher: International Monetary Fund
ISBN: 1589067967
Category : Business & Economics
Languages : en
Pages : 106
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Book Description
This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy tool for influencing activity and inflation, and there is little agreement about the appropriate role of the exchange rate.The exchange rate is a more important monetary policy tool for emerging economies that have adopted inflation targeting than it is for inflation-targeting advanced economies. Inflation-targeting emerging economies generally have less flexible exchange rate arrangements and intervene more frequently in the foreign exchange market than their advanced economy counterparts. The enhanced role of the exchange rate reflects these economies' greater vulnerability to exchange rate shocks and their less developed financial markets. However, their sharper focus on the exchange rate may cause some confusion about the commitment of their central banks to achieve the inflation target and may also complicate policy implementation. Global inflation pressures, greater exchange rate volatility, and the financial stresses from the global financial turmoil that began in mid-2007 are heightening these tensions.
Author: Charles Freedman
Publisher: International Monetary Fund
ISBN: 145187233X
Category : Business & Economics
Languages : en
Pages : 27
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Book Description
This is the second chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." We begin by discussing the costs of inflation, including their role in generating boom-bust cycles. Following a general discussion of the need for a nominal anchor, we describe a specific type of monetary anchor, the inflation-targeting regime, and its two key intellectual roots-the absence of long-run trade-offs and the time-inconsistency problem. We conclude by providing a brief introduction to the way in which inflation targeting works.
Author: Mr.Rudolfs Bems
Publisher: International Monetary Fund
ISBN: 148439223X
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989. We then study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates. We find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored.
Author: Mr.Marcus Miller
Publisher: International Monetary Fund
ISBN: 1451981775
Category : Business & Economics
Languages : en
Pages : 18
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Book Description
In this paper three possible reasons are examined for a sluggish inflation response to a hard currency peg. Models of overlapping wage contracts are analyzed and shown to generate little inertia. This contrasts with the effects of government credibility and the speed of private sector learning, which are shown to have a major impact on the speed of inflation adjustment. But even if individual agents believe the government will not devalue, it is shown that inflation inertia can still arise if these expectations are not common knowledge.
