scholarly journals Exchange Rate Targeting Versus Inflation Targeting: Empirical Analysis of the Impact on Employment and Economic Growth

2020 ◽  
Vol 9 (2) ◽  
pp. 67-85
Author(s):  
Borivoje Krušković
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Least Squares ◽  
Inflation Targeting ◽  
Empirical Studies ◽  
Exchange Rate Policy ◽  
Exchange Rate Targeting ◽  
Stepwise Method ◽  
Rate Policy ◽  
The Impact

AbstractThis paper analyses the effects of two alternative monetary strategies (exchange rate targeting and inflation targeting) on economic growth and employment. On the panel of 18 countries for the period from 1996 to 2013, I tested the hypothesis that countries in exchange rate targeting have a higher rate of GDP growth and lower inflation rate. In order to test the impact of exchange rate policy on economic growth and prices, I applied dynamic panel two stepwise method of least squares (2SLS method) and they were evaluated by two independent regression equation. In order to allow the comparison of results related to exchange rate targeting, the effects of the introduction of inflation targeting in the unemployment rate were also estimated using the panel method two stepwise least squares (2SLS method). Results of empirical studies show that countries with inflation targeting have a lower rate of economic growth and higher unemployment.

Fear of Free Floating or Forced Exchange Rate Fixing

2004 ◽  
pp. 112-122
Author(s):  
O. Osipova
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Float Exchange Rate ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate Arrangements ◽  
Pass Through

After the financial crisis at the end of the 1990 s many countries rejected fixed exchange rate policy. However actually they failed to proceed to announced "independent float" exchange rate arrangement. This might be due to the "fear of floating" or an irreversible result of inflation targeting central bank policy. In the article advantages and drawbacks of fixed and floating exchange rate arrangements are systematized. Features of new returning to exchange rates stabilization and possible risks of such policy for Russia are considered. Special attention is paid to the issue of choice of a "target" currency composite which can minimize external inflation pass-through.

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.

On the Exchange Rate Policy

2010 ◽  
pp. 21-28
Author(s):  
K. Yudaeva
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Institutional Changes ◽  
Crisis Period ◽  
Local Currency ◽  
High Inflation ◽  
Rate Policy ◽  
The Exchange Rate

The level of trust in the local currency in Russia is very low largely because of relatively high inflation. As a result, Bank of Russia during crisis times can not afford monetary policy loosening and has to fight devaluation expectations. To change the situation in the post-crisis period Russia needs to live through a continuous period of low inflation. Modified inflation targeting can help achieve such a result. However, it should be amended with institutional changes, particularly development of hedging instruments.

scholarly journals Five Years of Inflation Targeting Without Economic Growth: What Should Be Changed? The Case of Russia

2021 ◽  
Vol 12 (3) ◽  
pp. 162
Author(s):  
Oscar Gasanov
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Foreign Exchange ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Economic Agents ◽  
Price Growth ◽  
The Interest Rate ◽  
The Stability ◽  
High Level

The article provides a review of approaches to assessing and analyzing the effectiveness of the interest rate and exchange rate policy of the Bank of Russia in the period 2015-2019. Despite the decrease in the rate of price growth, inflationary expectations of economic agents remain at a high level. Monetary policy continues to be tight. The stability of the exchange rate to external shocks, expected from the introduction of inflation targeting and a free floating rate, did not happen. The complex of conditions that have developed due to geopolitical factors, low growth rates and the global economic crisis caused by the coronavirus pandemic require the search for new targets, such as economic growth and exchange rate stability. To maintain the stability of the ruble exchange rate, it is recommended to sell foreign exchange reserves accumulated according to the "Budget rule" in an equivalent amount; to support the liquidity of banks during periods of an attack on the ruble, it should through foreign exchange REPO, and develop a derivatives market.

Switching to Floating Exchange Rate in Russia under the Strategy of Price Stability

2015 ◽  
Vol 2015 (4) ◽  
pp. 11-29
Author(s):  
Sergey Dubinin ◽  
Nina Miklashevskaya
Keyword(s):  
Exchange Rate ◽  
Main Part ◽  
Inflation Targeting ◽  
World Market ◽  
Emerging Countries ◽  
Exchange Rate Policy ◽  
Policy Issues ◽  
The World ◽  
Floating Exchange Rate ◽  
Rate Policy

The article focuses on the implementation of the exchange rate policy of the Bank of Russia aimed to switch from the managed arrangement to floating under inflation targeting. It provides a theoretical framework of such policy with special regard to emerging countries. The main part of the article deals with the policy issues, which Russia has been facing within the western sanctions and oil price falling at the world market. It contains the analysis of risks, which countries implementing the switching to floating may be exposed to and which should be taken into account by government authorities. Special attention is paid to the measures of economic policy to minimize the risks. It is concluded that the switching to floating may be appropriate only in case of availability of a set of required conditions.

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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