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.

scholarly journals Analysis of nominal exchange rate pass-through effect on inflation rate in selected countries

Bankarstvo ◽  
2021 ◽  
Vol 50 (3) ◽  
pp. 8-35
Author(s):  
Aleksandra Živković
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Developed Countries ◽  
Nominal Exchange Rate ◽  
Policy Regime ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact

Inflation rate is one of the essential macroeconomics variables and it represents the main goal of monetary policy. It is determined by a great number of factors, so it is necessary to analyse the impact their changes have on inflation rate. The purpose of this research is the analysis of the nominal exchange rate pass-through effect on inflation rate in selected emerging and developed countries in the period 2014-2020, which share the same characteristics of inflation targeting, as main monetary policy regime, and managed floating exchange rate, as exchange rate type. Inverse proportion between volatility of nominal exchange rate and inflation rate is proven (depreciation of nominal exchange rate of national currency leads towards the growth of inflation rate), as well as higher pass-through effect in emerging countries compared to developed countries.

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 Dynamic Relationship between RMB Exchange Rate and Interest Rate Based on VAR-DCC-GARCH Model

2020 ◽  
Vol 214 ◽  
pp. 03018
Author(s):  
Xuhang Zhao
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rate Volatility ◽  
Garch Model ◽  
Nominal Exchange Rate ◽  
Practical Significance ◽  
Causality Test ◽  
Dynamic Relationship ◽  
Interest Rate Volatility

Based on the daily data of Shibor and nominal exchange rate from 2006 to 2019, this paper constructs VAR model and uses Granger causality test and impulse response model to analyze the dynamic relationship between exchange rate and interest rate. Based on the DCC-GARCH model, this paper analyzes the correlation between exchange rate volatility and interest rate volatility, and concludes that there is a weak negative correlation between exchange rate and interest rate. Both exchange rate and monetary policy will have an important impact on China’s economic environment, so it is of great practical significance to study the joint impact of exchange rate and monetary policy.

The Transmission Mechanism of Monetary Policy Shocks in Nigeria: The Interest and Exchange Rates Channels.

2020 ◽  
Vol 7 (9) ◽  
pp. 283-311
Author(s):  
Elias A. Udeaja ◽  
Nathan P. Audu ◽  
Titus O. Obiezue
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Structural Model ◽  
Consumer Price Index ◽  
Policy Instruments ◽  
Nominal Exchange Rate ◽  
Transmission Mechanism ◽  
Vector Autoregressive ◽  
Policy Shocks

This paper examines the effectiveness of the interest and exchange rates channels of monetary policy transmission mechanism. The paper employed several statistical cum econometric methodology in a baseline structural vector autoregressive (SVAR) model to evaluate the influence of policy shocks on selected endogenous variables; gross domestic product (GDP), consumer price index (CPI), money supply (MS), treasury bill rate (TBR) and nominal exchange rate (NER) for Nigerian spanning 1981Q1 to 2020Q1. The contemporaneous coefficients in the structural model reveals that key monetary aggregates reacts positively to unexpected changes in the monetary policy instruments. Furthermore, the variance decomposition results indicate that shocks of the selected variables were found to be important for interest rate growth in the short and longer horizons. The exchange rate channel however appears to have a stronger impact on prices. These results mean that depreciation of the nominal exchange rate could be an external deflationary element, particularly for Nigeria.

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 MEKANISME SUKU BUNGA SBI SEBAGAI SASARAN OPERASIONAL KEBIJAKAN MONETER DAN VARIABEL MAKROEKONOMI INDONESIA: 1990.1 - 2007.4

2008 ◽  
Vol 11 (1) ◽  
Author(s):  
Nova Riana Banjarnahor
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Inflation Targeting ◽  
Vector Autoregressive ◽  
Market Rate ◽  
Empirical Ground ◽  
Time Deposit ◽  
The Interest Rate ◽  
Rate Mechanism

Bank Indonesia has applied the Inflation Targeting Framework (ITF) to reach its single-final objective; stabilizing Rupiah reflected in the inflation and its exchange rate. The central bank of Indonesia uses the interest rate as his operational target to achieve the targeted inflation. Regardless of whether Bank Indonesia uses the Certificate of Bank Indonesia (SBI) or the money market rate (PUAB), on empirical ground the targeted inflation is hard to achieve.This paper analyzes the monetary policy of Bank Indonesia and its impact on macroeconomic variables. The application of Differenced Vector Autoregressive (DVAR) method shows that the monetary policy has a direct impact on the time deposit rate and an indirect impact on the exchange rate, money supply, gross domestic product and on consumer’s price index.JEL Classification: C32, E52, E58Keywords: SBI Interest Rate Mechanism, DVAR, IRF, FEVD

scholarly journals Inflation Targeting Experience: Lessons for Ukraine

2015 ◽  
pp. 39-53 ◽  
Author(s):  
David Vavra
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Initial Conditions ◽  
Emerging Market ◽  
Policy Transmission ◽  
Policy Frameworks ◽  
Fiscal Dominance ◽  
General Lesson ◽  
New Framework

In the past three decades, many advanced market and emerging market economies have modernized their monetary policy frameworks. We research the experience of these economies for lessons relevant to the monetary policy in Ukraine, which has recently embarked on a similar modernization program. Most countries we study have adopted some form of inflation targeting, given unfavorable experiences with previous regimes based on money and exchange rate, however with the exchange rate continuing to play an important role. Most of the pillars of effective IT monetary policy developed over time through determined efforts led by central banks, and the initial conditions did not matter for success. Countries have experienced numerous challenges with regards to communication, credibility, policy transmission, and fiscal dominance. Overcoming these challenges gave rise to new practices, which now form the stateof- the art monetary policy, irrespective of whether it is called an IT regime. A general lesson for Ukraine (as well as other future modernizers and IT adopters) is that determination and speed in building the pillars of IT policy is paramount for success and credibility of the new framework.

Does Monetary Policy Regime Affect Inflation?

2016 ◽  
Vol 2016 (5) ◽  
pp. 39-51
Author(s):  
Filipp Kartaev
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Global Financial Crisis ◽  
Developed Countries ◽  
Emerging Countries ◽  
Public Confidence ◽  
Inflation Expectations ◽  
Exchange Rate Targeting ◽  
Nominal Anchor

The article treats long-term impact of monetary policy nominal anchor choice (inflation targeting, exchange rate targeting, money supply targeting) on inflation level in developed and emerging countries. The research was built on panel data for 188 countries, which includes period after the global financial crisis. The results show, that inflation or exchange rate targeting allows to reduce inflation rate in emerging countries, while in developed countries the use of monetary policy nominal anchor does not give additional benefits in inflation control. This difference can be explained by the fact, that nominal anchor implementation in emerging countries enhances public confidence in monetary authority actions to control inflation. Higher confidence decreases inflation expectations and hence inflation. In contrast, central banks of developed countries can stabilize price level without use of nominal anchor due to good reputation.

scholarly journals Monetary policy and exchange rate regime in tourist islands

2020 ◽  
pp. 135481662095949
Author(s):  
Federico Inchausti-Sintes ◽  
Ubay Pérez-Granja
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Dynamic Stochastic General Equilibrium ◽  
Exchange Rate Policy ◽  
Monetary Policies ◽  
Rate Policy ◽  
Dynamic Stochastic ◽  
Travel Industry

The broad impact of the travel industry on economies has been comprehensively analysed in the tourism literature. Despite this, its consequences for monetary policy have remained unaddressed. This article aims at providing a first approach in this line for the case of three small tourist islands such as Cabo Verde, Mauritius and Seychelles. The research is based on a Bayesian estimation using a dynamic stochastic general equilibrium model (DSGE), and the optimal response to a tourism demand shock of four monetary policies is analysed. According to the results, both a conventional peg and an inflation-targeting policies achieve better economic performance. More precisely, the inflation is lower in the former. However, the rise in consumption and the gain in the external competitiveness are sharper in the latter. Finally, the other two policies, an inflation-targeting with managed exchange rate policy and an imported-inflation targeting policies, generate higher consumption and external competitiveness, but, also higher inflation and interest rate.

scholarly journals Exchange Rate Pass-Through to Domestic Prices: The Turkish Case (2002-2014)

2017 ◽  
Vol 7 (2) ◽  
pp. 202
Author(s):  
Ilyas Sıklar ◽  
Merve Kocaman ◽  
Sevcan Kapkara
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Nominal Exchange Rate ◽  
Vector Autoregressive ◽  
Consumer Prices ◽  
Domestic Prices ◽  
Producer Prices ◽  
Pass Through ◽  
Turkish Case ◽  
Exchange Rate Pass Through

This study examines the degree of exchange rate pass through (ERPT) into producer prices and consumer prices in Turkey. To see the effect of ERPT, recursive vector autoregressive (VAR) model on monthly data from January 2002 to November 2014 is used. Model includes six variables which are oil prices that represent supply shock, industry production index representing demand shocks, reserve money representing monetary policy, nominal exchange rate and CPI-PPI indices. Obtained results show that although there is a pass through from exchange rate to consumer and producer prices, its degree is not as effective as prior to 2001. This means that policymakers have more power for pursuing independent monetary policy.

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