scholarly journals Development of Inflation Expectations in Serbia and a Comparative Analysis

2020 ◽  
Vol 9 (1) ◽  
pp. 61-79
Author(s):  
Vesna Martin
Keyword(s):  
Comparative Analysis ◽  
Trade Unions ◽  
Inflation Targeting ◽  
Inflation Expectations ◽  
Economic Agents ◽  
Inflation Expectation ◽  
Floating Exchange Rate ◽  
National Bank ◽  
Targeting Strategy

AbstractInflation expectations are very important when it comes to monetary policy and its decisions. In countries which are applying inflation targeting, inflation expectations reflect prediction of economic agents of movement of inflation rate in mid and long term. Anchored inflation expectations and their movements within target tolerance band are pointing to effectiveness of the inflation targeting strategy. Consistent with the best international practice, after introducing the inflation targeting regime in January 2009, the National Bank of Serbia began monitoring and analysing inflation expectations of economic agents (financial sector, corporate sector, trade unions, and households). The aim of this paper is to analyse inflation expectations in Serbia, but also to give a comparative analysis of inflation expectation of other countries which are using inflation targeting and floating exchange rate, as is the case of the National Bank of Serbia.

scholarly journals INFLATION TARGETING UNDER IMPERFECT CREDIBILITY: LESSONS FROM INDONESIAN EXPERIENCE

2011 ◽  
Vol 13 (3) ◽  
pp. 271-306
Author(s):  
Harmanta Harmanta ◽  
M. Barik Bathaluddin ◽  
Jati Waluyo
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Instrument ◽  
Jel Classification ◽  
Inflation Target ◽  
Sacrifice Ratio ◽  
Economic Agents ◽  
Inflation Expectation ◽  
Imperfect Credibility

This paper try to assess role of credibility in the implementation of inflation targeting framework in Indonesia. It illustrates how credibility may play an important role in the evolution of the Indonesian monetary policy. Knowing the degree of credibility would beneficial for Bank Indonesia (BI) to understand how to adjust policy instrument to achieve a long-term inflation target. Scaled from zero (purely not credible) to one (perfect credibility), our quantitative measurements found that credibility index for Indonesian monetary policy converge to around 0.5. Refer to projection and simulation results in this paper, the study shows expectation inflation of economic agents is strongly influenced by monetary policy credibility. The more credible the monetary policy, the faster inflation expectation would anchor to its target. In addition, high credibility also increase the efficiency of the monetary policy transmission since the disinflation cost represented by sacrifice ratio is lower. Under imperfect credibility the central bank prefer to attain its inflation target gradually, and if the credibility stock is doubled, then achieving its long-term inflation target required a lot shorter time (approximately 0.4 periods than the baseline). JEL Classification: E31, E52, E58, E61Keywords: Disinflation, Monetary Policy, Imperfect Credibility, Sacrifice Ratio

scholarly journals INFLATION TARGETING UNDER IMPERFECT CREDIBILITY BASED ON ARIMBI (Aggregate Rational Inflation - Targeting Model for Bank Indonesia); LESSONS FROM INDONESIAN EXPERIENCE

2011 ◽  
Vol 13 (3) ◽  
Author(s):  
Harmanta Harmanta ◽  
M. Barik Bathaluddin ◽  
Jati Waluyo
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Instrument ◽  
Jel Classification ◽  
Inflation Target ◽  
Sacrifice Ratio ◽  
Economic Agents ◽  
Inflation Expectation ◽  
Imperfect Credibility

This paper try to assess role of credibility in the implementation of inflation targeting framework in Indonesia. It illustrates how credibility may play an important role in the evolution of the Indonesian monetary policy. Knowing the degree of credibility would beneficial for Bank Indonesia (BI) to understand how to adjust policy instrument to achieve a long-term inflation target.Scaled from zero (purely not credible) to one (perfect credibility), our quantitative measurements found that credibility index for Indonesian monetary policy converge to around 0.5. Refer to projection and simulation results in this paper, the study shows expectation inflation of economic agents is strongly influenced by monetary policy credibility. The more credible the monetary policy, the faster inflation expectation would anchor to its target. In addition, high credibility also increase the efficiency of the monetary policy transmission since the disinflation cost represented by sacrifice ratio is lower. Under imperfect credibility the central bank prefer to attain its inflation target gradually, and if the credibility stock is doubled, then achieving its long-term inflation target required a lot shorter time (approximately 0.4 periods than the baseline).JEL Classification: E31, E52, E58, E61Keywords: Disinflation, Monetary Policy, Imperfect Credibility, Sacrifice Ratio

scholarly journals The Analysis of Monetary Transmission Mechaniscm by Expectation Patterns in Influencing the Inflation

2018 ◽  
Vol 6 (4) ◽  
pp. 412-419
Author(s):  
Ilma Ulfatul
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Transmission Mechanism ◽  
Output Gap ◽  
Inflation Expectations ◽  
Short Term ◽  
Inflation Expectation ◽  
Policy Transmission ◽  
Monetary Policy Transmission Mechanism

Bank Indonesia set inflation targeting framework from 1 July 2005 by publicizing the inflation target or forward inflation to the public. However, the phenomenon show that most of the actual inflation of Indonesia is not in accordance with inflation targeting that have been set by Bank Indonesia. The purpose of this research is to analyze and know the flow of monetary policy transmission mechanism of expectation line in influencing inflation, to analyze and to know the influence of long-term and short-term and the shocks of interest rate, exchange rate, inflation expectations, output gap and GDP on inflation in Indonesia. The variables used in this research are BI Rate, Exchange Rate, Inflation Expectation, Output Gap, GDP and Inflation. The data used in this research is monthly data of time series from January 2006 until June 2016 which come from Bank Indonesia (BI) and Central Statistic Agency (BPS). The method used in this research is Vector Error Correction Model (VECM). The result of research indicates that: The flow of monetary policy transmission mechanism of expectation line in influencing inflation in Indonesia runs continuously with indicated the existence of two-way relationship between exchange rate and inflation variable, in the short term, the BI Rate, Exchange Rate and Output Gap are significant and positively affect inflation, inflation expectation variables are significant and affect inflation and GDP variable is insignificant to inflation in Indonesia, while in long run variable affecting inflation rate are BI Rate and inflation expectations, based on the variance decomposits result shows that the biggest variant contributing to inflation in Indonesia is the BI Rate.

scholarly journals Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the U.S., U.K., and Sweden

2006 ◽  
pp. 1.000-51.000 ◽  
Author(s):  
Refet S. Gürkaynak ◽  
◽  
Andrew T. Levin ◽  
Eric T. Swanson ◽  
◽  
...  
Keyword(s):  
Inflation Targeting ◽  
Inflation Expectations ◽  
Bond Yields ◽  
Long Run ◽  
The U.S

DETERMINANTS OF INFLATION IN INDIA IN A DYNAMIC SETUP

2021 ◽  
pp. 1-20
Author(s):  
MASUDUL HASAN ADIL ◽  
MOHAMMAD AZEEM KHAN ◽  
HAROON RASOOL
Keyword(s):  
Open Economy ◽  
High Frequency ◽  
Inflation Targeting ◽  
Explanatory Variable ◽  
Household Survey ◽  
Inflation Expectations ◽  
Bounds Testing ◽  
Inflation Expectation ◽  
Long Run ◽  
Bounds Testing Approach

The present study empirically examines the factors accounting for inflation in India in an open economy framework by utilizing the bounds testing approach to cointegration for the 2006: Q3-2019: Q4 period. The findings reveal the existence of a long-run relationship with the household survey-based inflation expectation, real output, narrow money aggregate and interest rate as important determinants of inflation. The study concludes that inflation is well explained by a combination of structural and monetary factors. Notably, the significance of inflation expectation as an important explanatory variable corroborates the utilization of inflation forecast by the RBI as an intermediate target in the flexible inflation targeting framework. In this backdrop, it is imperative for RBI to conduct a high frequency inflation expectations survey of households to account for frequent information updation on the part of certain groups of households.

scholarly journals Monetary Policy Analysis in Serbia

2015 ◽  
Vol 4 (3) ◽  
pp. 147-180 ◽  
Author(s):  
Vesna Martin
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Central Bank ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Policy Instruments ◽  
Exchange Rate Policy ◽  
Floating Exchange Rate ◽  
National Bank ◽  
Main Regulator

Abstract The paper focuses on analysing monetary policy in Serbia. The National Bank of Serbia chose inflation targeting, which sets price stability as the main objective of monetary policy. To achieve this goal, the central bank uses different monetary policy instruments which analysis can provide us with the understanding of the main directions of their actions but also of the limitations of its application. Only through improvement of both instruments and monetary policy the central bank will create a better foundation for achieving monetary stability. In addition, the implementation of exchange rate policy is entrusted to the National Bank of Serbia, as the main regulator of the financial system. A mere use of managed floating exchange rate, as the chosen exchange rate regime, is an appropriate solution in the current economic circumstances and in accordance with the desired objective of monetary policy.

scholarly journals Sentimental Outlook for the Monetary Policies of South African Reserve Bank

2021 ◽  
Vol 10 (3) ◽  
pp. 37-56
Author(s):  
Arnold Segawa
Keyword(s):  
Central Bank ◽  
South African ◽  
Inflation Targeting ◽  
Causal Effect ◽  
Effective Communication ◽  
Inflation Expectations ◽  
Systematic Analysis ◽  
Central Bank Communication ◽  
Inflation Expectation ◽  
Reserve Bank

The South African Reserve Bank (SARB) migrated to inflation targeting in 2000 and has since embarked on a trajectory of transparency. This has taken the shape of releasing Monetary Policy Committee (MPC) statements other forms of communication. This paper examines SARB’s MPC statements’ tone and sentiment between 2000 and 2021 using the Besigye-Segawa’s TextBlob polarity and subjectivity calculator which measures central bank communication tone and sentiment using the Loughran-McDonald dictionary’s word classification to gauge polarity and subjectivity. The study goes on to explore causality of SARB’s MPC statements’ tone and sentiment on inflation expectation results from the Bureau of Economic (BER) results survey. The systematic analysis shows a causality of SARB’s MPC statements’ tone and sentiment on succeeding BER’s inflation expectations results therein justifying the need for effective communication as SARB’s MPC communications’ polarity and subjectivity ultimately have a causal effect on inflation expectations. therein justifying the need for effective communication. As central bank tone and sentiment studies are only emerging in many emerging and frontier markets, this study lays a foundation for future exploration of effects of central bank communication on the expectations channel.

Theoretical Approaches to Inflation Expectation Management Justification in Today’s Russia

2014 ◽  
Vol 2014 (6) ◽  
pp. 35-51
Author(s):  
Ilya Gurov
Keyword(s):  
Economic Environment ◽  
Inflation Expectations ◽  
Economic Agents ◽  
Low Level ◽  
Inflation Expectation ◽  
The Past ◽  
Inflation Forecasts ◽  
Theoretical Approaches ◽  
Expectation Management ◽  
The Subject

Inflation expectations significantly influence economic environment. During the past decades there was high and unstable inflation and systematic excess and mismatch between actual inflation and official forecasts in Russia. At present economic agents have low level of trust in official inflation forecasts. The subject of the research are inflation expectations in Russia. The aim of the research is to justify the possibility of inflation expectation management provision in Russia. The article shows that currently, nowadays inflation expectations are predominantly adaptive in Russia. Nevertheless, inflation reduction and stabilization in 2011-2013 can become the basis for inflation expectations anchor provision and perceived inflation uncertainty minimization.

scholarly journals THE INFLUENCE OF DECISIONS ON INCREASING SOCIAL STANDARDS ON MONETARY POLICY

2021 ◽  
Vol 2 (37) ◽  
pp. 37-46
Author(s):  
S. Kolodii ◽  
M. Rudenko ◽  
L. Gariaga ◽  
I. Kochuma ◽  
S. Kolodii
Keyword(s):  
Monetary Policy ◽  
Minimum Wage ◽  
Inflation Targeting ◽  
Jel Classification ◽  
Inflation Expectations ◽  
Good Decision ◽  
Economic Agents ◽  
Social Standards ◽  
The Government ◽  
Fiscal And Monetary Policy

Abstract. Raising social standards is an essential instrument of social policy by the state. However, the decision to raise the minimum wage rather sharply should consider its impact on fiscal and monetary policy. The article aims to study how government decisions on social standards (in particular minimum wages) can influence monetary policy decisions based on inflation targeting. Results of the research. The method of analysis of indicators and consequences of the introduction of inflation targeting in Ukraine, geographical neighbors and countries with similar economies is described. It is determined that the final effect of changes in social standards on inflation depends on the entire transmission mechanism, which includes several interrelated reactions, and maybe stretched over time, depending on both the speed of transmission of the impulse and the specifics of institutional regulation. It is established that the criterion for a dramatic increase in the minimum wage is a significant upward shift of the minimum wage to the average wage ratio curve. In this case, as we have shown, inflation expectations worsen, which modifies somewhat the behaviour of economic agents and is transferred to current inflation rates in the future. Raising social standards is a good decision of the government in order to maintain household incomes. However, to ensure the neutrality of such a decision for fiscal and monetary policy, it needs to be aligned with its objectives and strategies. Keywords: social standards, monetary policy, inflation targeting, minimum wage, GDP, government. JEL Classification Е 600 Formulas: 0; fig.: 3; tabl.: 1; bibl.: 17.

scholarly journals Does Monetary Policy Credibility Help in Anchoring Inflation Expectations? Evidence from Six Inflation Targeting Emerging Economies

2021 ◽  
Vol 10 (1) ◽  
pp. 93-111
Author(s):  
Aslı Güler
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Emerging Economies ◽  
Inflation Targeting ◽  
Emerging Market ◽  
Inflation Expectations ◽  
Inflation Target ◽  
The Public ◽  
Inflation Expectation ◽  
Using Data

Abstract Most emerging market central banks have adopted inflation targeting as their monetary policy system. The heart of inflation targeting system is inflation expectations. The success of a central bank in achieving targets depends on to the extent to which inflation expectations are formed by the announced targets. As the credibility of the central bank increases, its ability to affect the public expectation also increases. The public adjusts its inflation expectations based on announced inflation target only in case of that they believe that the central bank has the sufficiency to reach the inflation target. Credibility enables expectation to be formed in a forward-looking way by weakening its connection with the past. This study aims to contribute to the literature concerning the effects of credibility on monetary policy. For this purpose, using data of six emerging inflation targeting economies (Turkey, Brazil, the Czech Republic, Chile, Poland, and South Africa), the empirical tests were carried out in order to understand the effect of the credibility on the behaviour of inflation expectation in emerging economies. The findings denote that credibility is quite relevant to reduce inflation expectations and contributes to the strength of inflation targets being an anchor for inflation expectations.

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