Inflation Targeting and Exchange Rate Management in Less Developed Countries

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.

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The Exchange Rate in the Adjustment Process of Less Developed Countries — A Multifarious Role

The International Adjustment Process ◽

10.1007/978-94-009-0871-0_20 ◽

1989 ◽

pp. 345-361

Author(s):

Henk Jager

Keyword(s):

Exchange Rate ◽

Developed Countries ◽

Adjustment Process ◽

Less Developed Countries ◽

The Exchange Rate

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Why is inflation targeting adopted?

Research in Applied Economics ◽

10.5296/rae.v12i1.16679 ◽

2020 ◽

Vol 12 (1) ◽

pp. 56

Author(s):

Yutaka Kurihara

Keyword(s):

Developing Countries ◽

Exchange Rate ◽

Central Bank ◽

Inflation Targeting ◽

Developed Countries ◽

The Other ◽

Other Hand ◽

Central Bank Credibility

Since the early 1990s, inflation targeting (IT) has been conducted in many countries and the number of the countries has been increasing rapidly. The outcomes of adopting IT has been discussed, however, the incentives of adopting IT is not fully examined. This study focuses on this issue empirically. The results are clearly divided into two types of countries. In developed countries, budget/GDP ratio, central bank credibility, exchange rate stability, and openness of the economy are deterministic elements of adopting IT, however interestingly, inflation itself does not play any roles of adopting IT. On the other hand, only inflation is the deterministic element of adopting IT in developing countries. Other elements, that are deterministic elements in developed countries, do not any effects on introducing IT. Moreover, countries would not like to limit the scope of policies when the economy’s openness is high.

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On the limits of the possibility of inflation targeting

Voprosy Ekonomiki ◽

10.32609/0042-8736-2017-10-71-87 ◽

2017 ◽

pp. 71-87

Author(s):

K. Korishchenko ◽

N. Pilnik

Keyword(s):

Exchange Rate ◽

Inflation Targeting ◽

Econometric Model ◽

Oil Prices ◽

Policy Regime ◽

Russian Economy ◽

Exchange Rate Management ◽

Price Growth ◽

Main Factors ◽

Main Determinants

The purpose of this article is to identify the main determinants of consumer price growth in the Russian economy. To achieve this goal, the degree of influence on inflation of the monetary policy of the Bank of Russia, tariff regulation and ruble exchange rate has been determined in the course of the work. The econometric model of inflation formation is used as a research tool depending on the dynamics of the main factors. The article explores the reasons for the significant growth in the volatility of the dollar and, as a consequence, its impact on consumer inflation. According to the presented model, the main volatility generators are the volatility of oil prices and the policy regime of exchange rate management.

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