scholarly journals Applying Foreign Exchange Interventions as an Additional Instrument Under Inflation Targeting: The Case of Ukraine

2016 ◽  
pp. 39-56 ◽  
Author(s):  
Anton Grui ◽  
Volodymyr Lepushynskyi
Keyword(s):  
Monetary Policy ◽  
Foreign Exchange ◽  
Inflation Targeting ◽  
Emerging Market ◽  
Projection Model ◽  
Macroeconomic Shocks ◽  
Policy Responses ◽  
National Bank ◽  
Policy Objectives ◽  
Key Policy

This study examines applying foreign exchange interventions under Inflation Targeting regime in an emerging market economy. For this purpose, we employ the Quarterly Projection Model of the National Bank of Ukraine and simulate different policy responses to various macroeconomic shocks. We discuss monetary policy objectives, which are low inflation volatility and accumulation of international reserves, and conclude that monetary policy could benefit from using interventions in addition to the key policy rate. We advise on particular policy reactions (with or without FX intervention) in case of different macroeconomic shocks.

scholarly journals Republic of Belarus

2020 ◽  
Vol 20 (162) ◽  
Author(s):  
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Initial Conditions ◽  
Policy Framework ◽  
Projection Model ◽  
Road Map ◽  
National Bank ◽  
The Republic ◽  
Analysis System ◽  
Monetary Policy Framework

The National Bank of the Republic of Belarus (NBRB) is reforming its monetary policy framework in line with recommendations of past IMF TA missions and its Road Map for Transitioning to Inflation Targeting with the aim of eventually adopting inflation targeting (IT). Transitioning to IT would require, among other strengthening the monetary policy forecasting and analysis system (FPAS) and better integrating the core quarterly projection model (QPM) into the decision-making process. This mission was the seventh in a planned series of quarterly FPAS TA missions. It was mainly aimed at helping with reviewing the initial conditions and compiling a QPM-based forecast as a part of the NBRB’s September forecasting round. The mission, in addition, worked on strengthening processes within the FPAS.

scholarly journals Pengujian Trilemma Conditions pada Perekonomian Indonesia

2017 ◽  
Vol 17 (2) ◽  
pp. 151-168
Author(s):  
Mela Yunita ◽  
Noer Azam Achsani ◽  
Lukytawati Anggraeni
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Financial Integration ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Emerging Market Countries ◽  
Constant Regression ◽  
Policy Objectives ◽  
Over Time

Testing the Trilemma Conditions of Indonesian EconomyThe key challenge for monetary policy in emerging market countries is simultaneously maintain monetary independence, exchange rate stability, and join with financial integration. This reseach explain the interaction of monetary policy in Indonesia over time to answer those three challenge with a Trilemma conditions. This research evaluate the Bank Indonesia’s decision to change the exchange rate regime and apllied ”inflation targeting”. The methods include to build the Trilemma’ index and testing the Trilemma with constant regression. The results indicate that Bank Indonesia has tradeoff in determining the combination of monetary policy objectives. Tradeoff for Bank Indonesia more heavy under free floating due to fear of floating’s problem and tradeoff lighter when inflation targeting applied.Keywords: Trilemma Hyphotesis; Different Exchange Rate Rezim; Inflation Targeting AbstrakTantangan utama kebijakan moneter di negara berkembang adalah secara bersamaan dapat mempertahankan independensi moneter, menjaga stabilitas nilai tukar, dan terlibat dalam integrasi keuangan global. Penelitian ini menjelaskan bagaimana kombinasi kebijakan moneter di Indonesia dari waktu ke waktu dapat menjawab ketiga tantangan tersebut dengan memenuhi kondisi Trilemma. Penelitian ini mengevaluasi keputusan Bank Indonesia mengubah rezim nilai tukar dan keputusan menerapkan target inflasi. Metode yang digunakan yaitu membangun indeks Trilemma dan mengujinya menggunakan constant regression. Hasilnya menunjukkan bahwa Bank Indonesia menghadapi tradeoff dalam menentukan kombinasi tujuan kebijakannya. Tradeoff lebih berat ketika periode rezim free floating karena adanya masalah fear of floating, sedangkan tradeoff lebih ringan ketika penerapan inflation targeting.

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 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.

Capital Control and Monetary Policy in Asian Emerging Market Economies

2018 ◽  
Vol 17 (2) ◽  
pp. 111-134
Author(s):  
Yongseung Jung ◽  
Soyoung Kim ◽  
Doo Yong Yang
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Labor Market ◽  
Foreign Exchange ◽  
Exchange Rate Regime ◽  
Emerging Market ◽  
Elasticity Of Substitution ◽  
Price Stability ◽  
Emerging Market Economies ◽  
Capital Control

This paper explores two policy options in emerging market economies (EMEs) to cope with volatile capital flows due to external monetary policy shocks; capital control policy and choice of exchange rate regime. Both tools reinforce each other when a foreign exchange risk premium shock hits the economy. A contractionary U.S. monetary policy shock has significant real effects in EMEs. Conventional wisdom tells us that a free floating exchange rate with inflation targeting is better when a country faces foreign shocks. However, we show that a flexible exchange rate with less capital controls is not the best option in EMEs based on vector autoregression analysis. Moreover, we set up a small open economy new Keynesian model with real wage and price rigidities. It shows that the small economy with labor market frictions is more vulnerable to exogenous shocks such as a foreign exchange rate shock under a fixed exchange rate regime than under a flexible exchange regime. We show that maintaining price stability is not desirable when there are substantial frictions in the labor market and the intratemporal elasticity of substitution is high. Finally, the model shows that the welfare cost difference between a policy of maintaining purchasing power and a policy aimed at price stability reverses as the intratemporal elasticity of substitution between home and foreign goods increases.

The czech embarrassment of inflation targeting in transition

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Martin Mandel ◽  
Vladimír Kosmata
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Framework ◽  
The Third ◽  
Interest Rate Volatility ◽  
Monetary Targeting ◽  
Theoretical Assumptions ◽  
National Bank ◽  
Monetary Policy Framework

In 1998 the Czech National Bank (CNB) changed its monetary policy framework and started to target inflation. The article discusses main theoretical aspects of inflation targeting and some practical problems with implementation of inflation targeting. The main characteristics of the inflation and monetary targeting are described in the first and second part. The third part deals with practical issues connected with inflation targeting (number of countries using inflation targeting, quality of inflation predictions, inflation and interest rate volatility). In the final part the CNB monetary policy function is estimated and the results are compared with the theoretical assumptions of the inflation targeting.

In search for a new anchor: inflation targeting in the czech republic

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Jiří Jonáš
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Policy Framework ◽  
The Czech Republic ◽  
Fourth Part ◽  
National Bank ◽  
New Framework ◽  
Monetary Policy Framework

In December 1997 the Czech National Bank introduced a new framework for the conduct of monetary policy, inflation targeting. This article examines the preliminary experience with inflation targeting in the Czech Republic. In the second part, we discuss the reasons that have led the Czech National Bank to introduce this monetary policy framework. Third part describes principal operational features of inflation targeting in the Czech Republic, and discusses the specifics of inflation targeting under the conditions of an economy in transition. Fourth part reviews the conduct of monetary policy under the new regime, focusing particularly on how the new policy framework has affected central bank's decisions about interest rates. Fifth part discusses some reasons why implementation of inflation targeting during the first two years was difficult, and sixth part evaluates the experience with inflation targeting and provides some suggestions for improving the framework.

scholarly journals The Monetary Policy of the National Bank of Romania in The Inflation Targeting Era. A Taylor Rule Approach

2015 ◽  
Vol 8 (2) ◽  
pp. 91-102
Author(s):  
Bogdan Căpraru ◽  
Norel Ionuţ Moise ◽  
Andrei Rădulescu
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Inflation Targeting ◽  
Taylor Rule ◽  
Output Gap ◽  
Inflation Differential ◽  
Rule Approach ◽  
National Bank ◽  
Potential Gdp ◽  
The One

AbstractIn this paper we analyse the monetary policy of the National Bank of Romania during 2005-2015 by estimating the Taylor rule, on a quarterly basis. We determined the potential GDP by employing the Hodrick-Prescott filter, in order to distinguish between the cyclical and the structural components of the output. Then, we estimated the traditional Taylor rule function (with a classic OLS regression), but slightly modified, as to take into account the forward-looking attitude of the NBR. The results confirm the direct correlation between the monetary policy rate and the output gap on the one hand, and the inflation differential (inflation - inflationtarget) on the other hand. Also, the results show us that NBR paid a higher attention to the dynamics of the inflation versus its target than to the output gap. Last, but not least, the central bank has been also sensitive to the financial stability, as reflected by the results of the incorporation of the ROBOR-EURIBOR spread in the classical Taylor rule.

scholarly journals Central bank's communication and markets' reactions: Polish evidence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Janusz Brzeszczyński ◽  
Jerzy Gajdka ◽  
Tomasz Schabek ◽  
Ali M Kutan
Keyword(s):  
Monetary Policy ◽  
Foreign Exchange ◽  
Financial Market ◽  
Foreign Exchange Market ◽  
Emerging Market ◽  
Public Information ◽  
Exchange Market ◽  
Market Segments ◽  
Content Type ◽  
The Impact

PurposeThis study contributes to the pool of knowledge about the impact of monetary policy communication of central banks on financial instruments' prices and assets' value in emerging markets.Design/methodology/approachEmpirical analysis is executed using the National Bank of Poland (NBP) announcements about its monetary policy covering the data from the broad financial market in its three main segments: stock market, foreign exchange market and bonds market. The reactions are measured relative to the changes in the NBP announcements and also with respect to investors' expectations. Autoregressive conditional heteroscedasticity (ARCH) models with dummy variables are used as the main methodological tool.FindingsBonds market and foreign exchange market are the most sensitive market segments, while interest rate and money supply are the most influential types of announcements. The changes of the revealed new macroeconomic figures had more impact on assets' prices movements than the deviations from their expectations. Moreover, greater diversity of the Monetary Policy Council (MPC) members' opinions on the voted motions, captured in the MPC voting reports, is associated with more cases of statistically significant NBP communication events.Practical implicationsThe findings have direct relevance for fund managers, portfolio analysts, investors and also for financial market regulators.Originality/valueThe results provide novel evidence about how the emerging financial market responds to monetary policy announcements. They help understand the nature of the impact of public information on financial assets' valuation and on movements of their prices, analysed comprehensively in three market segments, in the emerging market environment.

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