A NOTE ON REMITTANCES, MONETARY REGIMES, AND NONTRADABLE INFLATION DYNAMICS

2015 ◽  
Vol 20 (6) ◽  
pp. 1668-1682 ◽  
Author(s):  
Emmanuel K.K. Lartey
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
The Philippines ◽  
Nominal Exchange Rate ◽  
Optimal Monetary Policy ◽  
Inflation Dynamics ◽  
Sectoral Output ◽  
Monetary Regimes ◽  
Fixed Exchange Rate

This paper examines the dynamic and desirable properties of monetary regimes in a remittances recipient economy, with emphasis on the effect on sectoral output and nontradable inflation dynamics. The findings indicate that under a fixed exchange rate regime, an increase in remittances creates increased demand for nontradable goods, and hence a rise in nontradable inflation, as well as expansion in output of nontradables. Under a nontradable inflation targeting regime, however, a decrease in nontradable inflation and an expansion in tradable goods production are observed following an increase in remittances. A near-zero nontradable inflation rate and managed variability in the nominal exchange rate typify the optimal monetary policy, suggesting that an inflation targeting regime is preferable to a fixed exchange regime under such a scenario. A VAR analysis shows that the dynamics of inflation in El Salvador and the Philippines is in consonance with those observed in the model under the fixed exchange rate and nontradable inflation targeting regimes, respectively.

scholarly journals Nominal exchange rate shocks and inflation in an open economy: towards a structuralist inflation targeting agenda

2020 ◽  
Vol 44 (6) ◽  
pp. 1271-1299 ◽  
Author(s):  
Eduardo F Bastian ◽  
Mark Setterfield
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Open Economy ◽  
Inflation Targeting ◽  
Open Economies ◽  
Nominal Exchange Rate ◽  
Structural Vulnerability ◽  
Inflation Dynamics ◽  
Exchange Rate Shocks

Abstract This paper develops a model of inflation in an open economy. The model permits analysis of the susceptibility of open economies to permanent inflationary consequences arising from transitory foreign exchange shocks. Sources of structural vulnerability to such events are identified, and means of addressing these structural vulnerabilities are discussed. Ultimately, the paper arrives at a ‘structuralist inflation targeting agenda’. Based on a proper conception of inflation dynamics, this involves ‘getting inflation targeting right’ rather than either accepting mainstream inflation targeting prescriptions or simply neglecting inflation altogether.

scholarly journals Contrôle De L’inflation En Regime De Change Fixe: Le Cas De La Communaute Economique Et Monetaire d’Afrique Centrale (CEMAC)

2017 ◽  
Vol 13 (10) ◽  
pp. 379
Author(s):  
Tangakou Soh Robert ◽  
Mba Fokwa Arsѐne ◽  
Akanga Reuben Johnson
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Endogenous Variable ◽  
Negative Effects ◽  
Development Indicators ◽  
Fixed Exchange Rate ◽  
The Exchange Rate ◽  
Main Determinants

This paper focuses on the determinants of inflation under different policy rules and fixed exchange rate regime, the example of the CEMAC zone. The purpose of this paper is to check the behaviour of inflation in fixed exchange rate regime for a flexible targeting period and a period of strict targeting. The data used are mainly from the World Bank, in «the book of world development indicators» contained in the CD -ROM (WDI 2015). Working for the periods 1977-1994, 1995-2012 and 1977-2012, the analyses was done with a dynamic panel that has the distinction of being among the independent variables, the endogenous variable lagged one or more periods. The endogenous variable is the rate of inflation. Estimates made from the Arellano and Bond (1991) method, it is clear that during the period (1977- 1994) of flexible inflation targeting, money supply, trade balance and the exchange rate are the main determinants of inflation. During the period (1995-2012) of strategy of strict inflation targeting, the main determinants of inflation are the benefits of natural resources, the trade balance and the economic crisis. The determinants of inflation have opposing effects of a match type to another and it is the combination of these effects for each variable that shows the different effects of the determinants of inflation over the period. The exchange rate increased the rate of inflation over the first sub-period (1977-1994) and throughout the entire period (1977-2012). In times (1995-2012) of strict inflation targeting, these negative effects were mitigated at the expense of economic growth. Countries with fixed exchange rate regime should not adopt a strict policy of inflation targeting, but should alternate with the growth objective by facilitating financing for investments.

scholarly journals Exchange Rate Regime, Inflation Targeting and Macroeconomic Performance

2016 ◽  
Vol 8 (8) ◽  
pp. 143
Author(s):  
Houda Jendoubi El Achnab
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Emerging Countries ◽  
Macroeconomic Performance ◽  
Panel Models ◽  
Fixed Exchange Rate ◽  
Targeting Strategy

<p>This study aims to examine whether emerging countries can use both an inflation targeting strategy and exchange rate regime targeting in order to improve their macroeconomic performance. Empirically, we are based on a sample of 28 emerging countries, over the period 1985-2000. Our findings yielded from mean comparisons tests reveal that in addition to the inflation targeting strategy, countries may adopt an exchange rate regime to improve their growth and decrease their inflation. Moreover, the use of interactive variables in panel models shows that the inflation targeting strategy is a complement to the flexible exchange-rate regime and a substitute for the fixed exchange rate regime.</p>

Exchange Rate Regimes and Economic Stability

2010 ◽  
pp. 29-43
Author(s):  
S. Smirnov
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Real Sector ◽  
Economic Stability ◽  
Exogenous Shocks ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Managed Floating

The Bank of Russia intends to introduce inflation targeting policy and exchange rate free floating regime in three years. Exogenous shocks absorption which stabilizes the real sector of economy is usually considered to be one of the advantages of free floating exchange rate policy. However, our research based on the analysis of 25 world largest economies exchange rates and industrial production during the crisis of 2008-2009 does not confirm this hypothesis. The article also analyzes additional risks associated with free floating exchange rate regime in Russia and presents some arguments in favor of managed floating exchange rate regime.

scholarly journals Difference in intensity of exchange rate factors in countries with targeting inflation regime

2021 ◽  
Vol 51 (3) ◽  
pp. 125-143
Author(s):  
A.M. Grebenkina ◽  
◽  
A.A. Khandruev ◽  
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Emerging Market ◽  
Exchange Rate Volatility ◽  
Developed Countries ◽  
Exchange Rate Policy ◽  
Nominal Exchange Rate ◽  
Vector Autoregressive ◽  
Market Factors

The paper analyzes features of prime factors of nominal exchange rate in countries with inflation targeting regime and high cross-border financial openness. The paper aims to test the hypothesis about different strength of these factors in developed countries and emerging market economies (EMEs). Using a panel vector autoregressive model and panel data for 2010 — 1st half-year 2020 period for 9 developed countries and 10 EMEs, the paper estimates significance of factors from the side of global commodity and financial markets, as well as the side of national monetary policy. The paper finds some evidence of greater sensitivity of EMEs’ nominal exchange rate to global commodity and financial market factors and a greater sensitivity of developed countries’ nominal exchange rate to national monetary policy. The paper regards this result as an argument for EMEs’ exchange rate policy specification, considering the necessity to cope with heightened exchange rate volatility in these countries under the influence of external factors.

Distribution and Conflict Inflation in Brazil under Inflation Targeting, 1999–2014

2017 ◽  
Vol 50 (2) ◽  
pp. 349-369 ◽  
Author(s):  
Ricardo Summa ◽  
Franklin Serrano
Keyword(s):  
Exchange Rate ◽  
Bargaining Power ◽  
Inflation Targeting ◽  
Nominal Exchange Rate ◽  
Target System ◽  
Real Wages ◽  
Inflation Target ◽  
Exchange Rate Depreciation

In this paper, we analyze Brazilian inflation under the inflation-targeting system from a conflict inflation perspective and show how the inflation target system only worked well when there was a trend of exchange rate appreciation. Later, the strengthening of the bargaining power of workers and rising real wages since 2006, combined with continuous nominal exchange rate depreciation after mid-2011, increased distributive conflicts and are ultimately behind the recent shift toward austerity.

Inflation targeting and exchange rate regimes in emerging markets

2018 ◽  
Vol 18 (2) ◽  
Author(s):  
Christian Ebeke ◽  
Armand Fouejieu
Keyword(s):  
Exchange Rate ◽  
Emerging Markets ◽  
Inflation Targeting ◽  
Propensity Scores ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Marginal Effect ◽  
It Adoption ◽  
Exchange Rate Flexibility ◽  
The Exchange Rate

Abstract This paper investigates the effects of the adoption of inflation targeting (IT) on the choice of exchange rate regime in emerging markets (EMs), conditional on certain macroeconomic conditions. Using a large sample of EMs and after dampening the endogeneity of the adoption of IT using a selection on observables, we find that IT countries on average have a relatively more flexible exchange rate regime than other EMs. However, the flexibility of the exchange rate regime shows strong heterogeneity among IT countries. IT countries with low trade and financial openness and with a large share of external debt exhibit a lower exchange rate flexibility than others. Moreover, the marginal effect of IT adoption on the exchange rate flexibility increases with the duration of the IT regime in place, and with the propensity scores to adopt it.

THE CASE FOR AN INTERMEDIATE EXCHANGE RATE REGIME

2007 ◽  
Vol 52 (03) ◽  
pp. 295-307 ◽  
Author(s):  
JOHN WILLIAMSON
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Rate System ◽  
Advantages And Disadvantages ◽  
Economics Profession ◽  
Rate Policy ◽  
Exchange Rate Changes ◽  
Floating Rates

The argument that any exchange rate regimes other than firmly fixed and freely floating rates were infeasible — the so-called bipolarity thesis — acquired great popularity in the wake of the Asian crisis of a decade ago, but it has almost vanished today. One reason is surely the unkind empirical evidence, which shows that intermediate regimes — measured as those where both reserve and exchange rate changes lie in an intermediate range — are not in fact tending to disappear (Levy Yeyati and Sturzenegger, 2002). Another reason is the recognition that exchange rate policy should have other objectives besides avoiding crises, and that in the world we live in today it is reasonable to give these other objectives a significant priority. And perhaps a third factor is growing recognition that it is possible to design or operate intermediate regimes in ways that avoid exposing them to the dangers that were focused on by the disciples of bipolarity. This article starts by distinguishing the options that countries face in choosing an exchange rate regime. It examines the advantages and disadvantages of each of them, finally suggesting that for most countries the real choice lies between freely floating rates, floating rates disciplined by a reference rate system, and an ill-defined managed floating with the management undefined. Three issues may influence the choice between those alternatives: transparency; perceived consistency with that pillar of current macroeconomic thinking, inflation targeting; and the theory of what determines exchange rates. In the latter context, it is argued that the current conventional wisdom of the economics profession is wrong, and that a more convincing diagnosis of the process of exchange rate determination lends support to the proposal for a reference rate system.

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