scholarly journals Examining the Success of the Central Banks in Inflation Targeting Countries: The Dynamics of Inflation Gap and the Institutional Characteristics

2014 ◽  
Author(s):  
Omid Ardakani ◽  
Narayan K. Kishor
Keyword(s):  
Inflation Targeting ◽  
Central Banks ◽  
Institutional Characteristics

scholarly journals Examining the success of the central banks in inflation targeting countries: the dynamics of the inflation gap and institutional characteristics

2018 ◽  
Vol 22 (1) ◽  
Author(s):  
Omid M. Ardakani ◽  
N. Kundan Kishor
Keyword(s):  
Inflation Targeting ◽  
Panel Data Analysis ◽  
Central Banks ◽  
Institutional Characteristics ◽  
Macroeconomic Performance ◽  
Fiscal Discipline ◽  
Policy Regime ◽  
Conditional Mean ◽  
Inflation Targets ◽  
The Difference

AbstractThis paper analyzes the performance of the central banks in inflation targeting (IT) countries by examining their success in achieving their explicit inflation targets. For this purpose, we decompose the inflation gap, the difference between actual inflation and the inflation target, into predictable and unpredictable components. We argue that the central banks are successful if the predictable component diminishes over time. The predictable component of the inflation gap is measured by the conditional mean of a parsimonious time-varying autoregressive model. Our results find considerable heterogeneity in the success of these IT countries in achieving their targets at the start of this policy regime. Our findings suggest that the central banks of the IT adopting countries started targeting inflation implicitly before becoming an explicit inflation targeter. The panel data analysis suggests that the relative success of these countries in reducing the gap is influenced by their institutional characteristics, particularly fiscal discipline and macroeconomic performance.

At the final stage of the global crisis: Economic tasksin 2017-2019

2018 ◽  
pp. 5-29 ◽  
Author(s):  
V. A. Mau
Keyword(s):  
Economic Growth ◽  
Final Stage ◽  
Government Regulation ◽  
Inflation Targeting ◽  
Social Dynamics ◽  
Growth Stimulation ◽  
Central Banks ◽  
Economic Area ◽  
National Trends

The paper deals with the global and national trends of economic and social development at the final stage of the global structural crisis. Special attention is paid to intellectual challenges economists will face with in the post-crisis world: prospects of growth without inflation, new global currencies and the role of cryptocurrencies, central banks independence and their role in economic growth stimulation, new tasks and patterns of government regulation, inequality and growth. Special features of Russian post-crisis development are also under consideration. Among them: prospects of macroeconomic support of growth, inflation targeting, new fiscal rule, social dynamics and new challenges to welfare state. The paper concludes that the main obstacles for economic growth in Russia are concentrated in the non-economic area.

INFLATION TARGETING: IT'S NOT BROKE, IT DOESN'T NEED FIXING, BUT CAN IT SURVIVE?

2010 ◽  
Vol 01 (01) ◽  
pp. 59-80
Author(s):  
PIERRE L. SIKLOS
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Asset Price ◽  
Central Banks ◽  
Economic Downturn ◽  
Price Increases ◽  
The Global Financial Crisis ◽  
Nominal Anchor

Until the end of 2005 there were few outward signs that the inflation targeting (IT) monetary policy strategy was deemed fragile or that the likelihood of abandoning it was high. In light of the severe economic downturn and the global financial crisis that has afflicted most economies around the world since at least 2008, it is worth reconsidering the question of the fragility of the inflation targeting regime. This paper reprises the approach followed in Siklos (2008) but adds important new twists. For example, the present study asks whether the continued survival of IT is due to the fact that some of the central banks in question did take account of changes in financial stress. The answer is no. Indeed, many central banks are seen as enablers of rapid asset price increases. The lesson, however, is not that inflation targeting needs to be repaired. Instead, refinements should be considered to the existing inflation targeting strategy which has evolved considerably since it was first introduced in New Zealand 20 years ago. Most notably, there should be continued emphasis on inflation as the primary nominal anchor of monetary policy, especially in emerging market economies (EME), even if additional duties are assigned to central banks in response to recent events.

scholarly journals Regular Econometric Model of Taylor for Albania

2016 ◽  
Vol 5 (1) ◽  
pp. 123
Author(s):  
Ergys Misha
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rates ◽  
Financial Stability ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Stock Exchange ◽  
Central Banks ◽  
Financial Assets

The Taylor’s Rule Central Banks is applying widely today from Central Banks for design the monetary policy and for determination of interest rates. The purpose of this paper is to assess monetary policy rule in Albania, in view of an inflation targeting regime. In the first version of the Model, the Taylor’s Rule assumes that base interest rate of the monetary policy varies depending on the change of (1) the inflation rate and (2) economic growth (Output Gap).Through this paper it is proposed changing the objective of the Bank of Albania by adding a new objective, that of "financial stability", along with the “price stability”. This means that it is necessary to reassess the Taylor’s Rule by modifying it with incorporation of indicators of financial stability. In the case of Albania, we consider that there is no regular market of financial assets in the absence of the Stock Exchange. For this reason, we will rely on the credit developmet - as a way to measure the financial cycle in the economy. In this case, the base rate of monetary policy will be changed throught: (1) Targeting Inflation Rate, (2) Nominal Targeting of Economic Growth, and (3) Targeting the Gap of the Ratio Credit/GDP (mitigating the boom cycle, if the gap is positive, and the contractiocycle if the gap is negative).The research data show that, it is necessary that the Bank of Albania should also include in its objective maintaining the financial stability. In this way, the contribution expected from the inclusion of credit gap indicators in Taylor’s Rule, will be higher and sustainable in time.

scholarly journals Janus Face of Inflation Targeting_Walter_PrePrint

2019 ◽  
Author(s):  
Timo Walter
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Recent Trend ◽  
Central Banks ◽  
Fine Tuning ◽  
Fine Grained ◽  
Prototype Development ◽  
The Us ◽  
Fundamental Uncertainty ◽  
Overall Effectiveness

In the 1980s, central banks around the world stumbled upon a new method for conducting theirmonetary policy: instead of the heavy-handed, „hydraulic“ manipulation of monetary aggregates,they learned to „govern the future“ by managing the expectations of market actors directly.New and better indicators and forecasts would provide the basis for a new communicativecoordination of markets expectations, permitting a more fine-grained and effective implementationof monetary policy, particular in controlling inflation.Focusing on the US Federal Reserve’s prototype development of inflation-targeting, this paper putsthis storyline to the test. Against the recent trend in sociology to conceive of expectations andfuturity as modes of coordination that thrive under conditions of (fundamental) uncertainty that defyrational calculation, I argue that futurity and the formation expectations inextricably depend onprior processes of formalization.Examining the transition to modern ‘inflation targeting’ monetary policy, I show how theeffectiveness of coordination by expectation is achieved by extensive processes of proceduralizationand standardization. While increasing the technical efficiency of fine-tuning expectations, thesegains are only possible because of the procedural narrowing of the scope of communicativeinteraction, which may significantly affect the overall effectiveness of this mode of coordination.I conclude with a call to more closely examine how formal and informal modes of coordination aremutually interdependent – and how the nature of their entanglements affects their effectiveness.

Monetary Policy and Oil Prices

2011 ◽  
Vol 11 (3) ◽  
pp. 1850232
Author(s):  
Mehdi S. Monadjemi
Keyword(s):  
Monetary Policy ◽  
International Trade ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Commodity Prices ◽  
Oil Prices ◽  
Central Banks ◽  
Trade Shocks ◽  
The Exchange Rate

Because of volatility, commodity prices are excluded from the CPI when inflation targeting is exercised. Rising commodity prices contribute to inflation but central banks show no reaction since the CPI does not register rise in prices. Frankel (2006) argues that monetary policy should consider the price of important export commodities such as oil, in oil exporting countries. He maintains that by doing so, central banks are able to benefit from the fluctuations of the exchange rate in the presence of a negative international trade shocks. Central banks cannot benefit from the fluctuation of the exchange rate if inflation targeting is the strategy for conducting monetary policy.

scholarly journals Coordinating expectations through central bank projections

2020 ◽  
Author(s):  
Fatemeh Mokhtarzadeh ◽  
Luba Petersen
Keyword(s):  
Central Bank ◽  
Rational Expectations ◽  
Inflation Targeting ◽  
Aggregate Stability ◽  
Central Banks ◽  
Output Gap ◽  
Forecast Errors ◽  
Market Participants ◽  
Wide Range ◽  
Ex Ante

AbstractCentral banks are increasingly communicating their economic outlook in an effort to manage the public and financial market participants’ expectations. We provide original causal evidence that the information communicated and the assumptions underlying a central bank’s projection can matter for expectation formation and aggregate stability. Using a between-subject design, we systematically vary the central bank’s projected forecasts in an experimental macroeconomy where subjects are incentivized to forecast the output gap and inflation. Without projections, subjects exhibit a wide range of heuristics, with the modal heuristic involving a significant backward-looking component. Ex-Ante Rational dual projections of the output gap and inflation significantly reduce the number of subjects’ using backward-looking heuristics and nudge expectations in the direction of the rational expectations equilibrium. Ex-Ante Rational interest rate projections are cognitively challenging to employ and have limited effects on the distribution of heuristics. Adaptive dual projections generate unintended inflation volatility by inducing boundedly-rational forecasters to employ the projection and model-consistent forecasters to utilize the projection as a proxy for aggregate expectations. All projections reduce output gap disagreement but increase inflation disagreement. Central bank credibility is significantly diminished when the central bank makes larger forecast errors when communicating a relatively more complex projection. Our findings suggest that inflation-targeting central banks should strategically ignore agents’ irrationalities when constructing their projections and communicate easy-to-process information.

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