Author: Mr.Armand Fouejieu
Publisher: International Monetary Fund
ISBN: 1475554710
Category : Business & Economics
Languages : en
Pages : 30
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Book Description
The sovereign debt crisis in Europe has highlighted the role of country risk premia as a link between countries’ fiscal and external balances, financial conditions and monetary policy. The purpose of this paper is to estimate how adoption of inflation targeting (IT) affects spreads. It is hypothesized that country risk premia for IT countries (especially among emerging market economies) may be lower than for other countries owing to greater policy predictability and more stable long-term inflation. The findings suggest that IT reduces the risk premium, both through adoption of the IT regime, and through the observed track record in stabilizing inflation.
Author: Mr.Marco Airaudo
Publisher: International Monetary Fund
ISBN: 1513567438
Category : Business & Economics
Languages : en
Pages : 65
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Book Description
We analyze coordination of monetary and exchange rate policy in a two-sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets. Our central finding is that management of the exchange rate greatly enhances the efficacy of inflation targeting. In a flexible exchange rate system, inflation targeting incurs a high risk of indeterminacy where macroeconomic fluctuations can be driven by self-fulfilling expectations. Moreover, small inflation shocks may escalate into much larger increases in inflation ex post. Both problems disappear when the central bank leans heavily against the wind in a managed float.
Author: Frederic S. Mishkin
Publisher: MIT Press
ISBN: 0262513374
Category : Business & Economics
Languages : en
Pages : 561
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Book Description
A leading academic authority and policymaker discusses monetary policy strategy from the perspectives of both scholar and practitioner, offering theory, econometric evidence, and extensive case studies. This book by a leading authority on monetary policy offers a unique view of the subject from the perspectives of both scholar and practitioner. Frederic Mishkin is not only an academic expert in the field but also a high-level policymaker. He is especially well positioned to discuss the changes in the conduct of monetary policy in recent years, in particular the turn to inflation targeting. Monetary Policy Strategy describes his work over the last ten years, offering published papers, new introductory material, and a summing up, “Everything You Wanted to Know about Monetary Policy Strategy, But Were Afraid to Ask,” which reflects on what we have learned about monetary policy over the last thirty years. Mishkin blends theory, econometric evidence, and extensive case studies of monetary policy in advanced and emerging market and transition economies. Throughout, his focus is on these key areas: the importance of price stability and a nominal anchor; fiscal and financial preconditions for achieving price stability; central bank independence as an additional precondition; central bank accountability; the rationale for inflation targeting; the optimal inflation target; central bank transparency and communication; and the role of asset prices in monetary policy.
Author: Mr.Mark R. Stone
Publisher: International Monetary Fund
ISBN: 1451842929
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
Inflation targeting lite (ITL) countries float their exchange rate and announce an inflation target, but are not able to maintain the inflation target as the foremost policy objective. This paper identifies 19 emerging market countries as practitioners of ITL. They seem to focus mainly on bringing inflation into the single digits and maintaining financial stability. ITL can be viewed as a transitional regime aimed at buying time for the implementation of the structural reforms needed for a single credible nominal anchor. The important policy challenges for an ITL central bank include whether or not to precommit to a single anchor.
Author: Mrs.Carol S. Carson
Publisher: International Monetary Fund
ISBN: 9781589061323
Category : Business & Economics
Languages : en
Pages : 396
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Book Description
This book brings together the experience of central banks and national statistical agencies in countries that focus their monetary policy on inflation targets. Inflation targeting has led to a close interface between these two sets of institutions. When the performance of a central bank is measured in terms of specified price indices, which are usually compiled and disseminated by the national statistical agency, the role of national statistical agencies becomes central to the credibility of monetary policy. Data needs and uses have also shifted, with implications for national and international statistics compilation: market data have gained in importance; less emphasis is placed on traditional monetary aggregates; and greater attention is paid to timeliness, adherence to sound economic accounting standards, and other aspects of data quality.
Author: Inci Ötker
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 46
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Book Description
This is the tenth chapter of a forthcoming monograph entitled, "On Implementing Full- Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." It describes the experiences of a number of countries with the introduction and implementation of inflation targeting regimes. It discusses their motivation for introducing IT; how they fared in meeting the various conditions that some have argued are needed in advance of introducing IT; how they transitioned to a full-fledged IT framework and coordinated their preparations with other economic policies and reforms; the benefits they gained by adopting IT; the challenges they faced in implementation; and the lessons from their experiences.
Author: Mr.Irineu E. de Carvalho Filho
Publisher: International Monetary Fund
ISBN: 1451963041
Category : Business & Economics
Languages : en
Pages : 24
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Book Description
This paper appraises how countries with inflation targeting fared during the current crisis, with the goal of establishing the stylized facts that will guide and motivate future research. We find that since August 2008, IT countries lowered nominal policy rates by more and this loosening translated into an even larger differential in real interest rates relative to other countries; were less likely to face deflation scares; and saw sharp real depreciations not associated with a greater perception of risk by markets. We also find some weak evidence that IT countries did better on unemployment rates and advanced IT countries have had relatively stronger industrial production performance. Finally, we find that advanced IT countries had higher GDP growth rates than their non-IT peers, but find no such difference for emerging countries or the full sample.
Author: Gerald A. Epstein
Publisher: Edward Elgar Publishing
ISBN: 1849801983
Category : Business & Economics
Languages : en
Pages : 333
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Book Description
Inflation targeting (IT) has become the sacred cow of central banking. But its suitability to developing nations remains contested. The contributors to this volume perform the valuable service of sketching out plausible, more development-friendly alternatives. They are to be commended in particular for avoiding a one-size-fits-all approach and paying close attention to the needs of specific countries. Their proposals range from relatively minor tinkering in IT to comprehensive overhaul. A common theme is the central role of the real exchange rate, which the central banks ignore at their economies peril. Dani Rodrik, Harvard University, US As the world economy is devastated by a virulent financial crisis and jobs are lost in scores, central bankers are increasingly questioned as to why they have failed to sustain stability and growth even though they told us all along that conquering inflation would be necessary and sufficient to do so while hoping to get a pat on the back for achieving a degree of price stability unprecedented in recent times. This book provides a lot of food for thought on why. It is a powerful critique of the orthodox obsession with inflation in neglect of the two deepseated problems of the unbridled market economy financial instability and unemployment. It is a must for all policy makers, notably in the developing world, and for the mainstream. Yilmaz Akyuz, formerly of the United Nations Conference on Trade and Development, Geneva, Switzerland This collective volume makes a compelling case for balancing the developmental and stabilization functions of central banks. In particular, the authors emphasize that, as practiced in many successful developing countries, competitive real exchange rates can be good for growth and employment generation, and should thus be a specific focus of central bank actions. The book is a must read for those looking for a more balanced framework for central bank policies. José Antonio Ocampo, Columbia University, US and former Under-Secretary-General of the United Nations for Economic and Social Affairs and Finance Minister of Colombia This book, written by an international team of economists, develops concrete, country specific alternatives to inflation targeting, the dominant policy framework of central bank policy that focuses on keeping inflation in the low single digits to the virtual exclusion of other key goals such as employment creation, poverty reduction and sustainable development. The book includes thematic chapters, including analyses of class attitudes toward inflation and unemployment and the gender impacts of restrictive monetary policy. Other chapters propose improved monetary frameworks for Argentina, Brazil, India, Mexico, the Philippines, South Africa, Turkey, and Vietnam. Policy frameworks that are explored include employment targeting, and targeting a stable and competitive real exchange rate. The authors also show that to reach a larger number of targets, including higher employment and stable inflation, central banks must use a larger number of instruments, including capital management techniques. This volume offers concrete, socially valuable alternatives that economists, policy makers, students and interested laypeople should consider before adopting one size fits all, often inadequate, policies that have become a virtual policy making fad.
Author: Ben S. Bernanke
Publisher: University of Chicago Press
ISBN: 0226044734
Category : Business & Economics
Languages : en
Pages : 469
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Book Description
Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.
Author: Mr.Armand Fouejieu
Publisher: International Monetary Fund
ISBN: 1475558686
Category : Business & Economics
Languages : en
Pages : 30
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Book Description
The sovereign debt crisis in Europe has highlighted the role of country risk premia as a link between countries’ fiscal and external balances, financial conditions and monetary policy. The purpose of this paper is to estimate how adoption of inflation targeting (IT) affects spreads. It is hypothesized that country risk premia for IT countries (especially among emerging market economies) may be lower than for other countries owing to greater policy predictability and more stable long-term inflation. The findings suggest that IT reduces the risk premium, both through adoption of the IT regime, and through the observed track record in stabilizing inflation.
