scholarly journals The Monetary Policy Credibility Channel and the Amplification Effects in a Semi-structural Model

2020 ◽  
Vol 20 (201) ◽  
Author(s):  
Thitipat Chansriniyom ◽  
Natan Epstein ◽  
Valeriu Nalban
Keyword(s):  
Monetary Policy ◽  
Structural Model ◽  
Inflation Expectations ◽  
Extended Model ◽  
Inflation Target ◽  
Asymmetric Effects ◽  
Policy Frameworks ◽  
Integrated Policy ◽  
Policy Credibility ◽  
Central Bank Credibility

The paper extends a standard semi-structural model to account for nonlinear and asymmetric effects of monetary policy credibility. In our setting, central bank credibility is proportional to the deviation of inflation expectations from the announced inflation target, with positive deviations being more costly compared to negative ones. A loss in policy credibility as a result of shocks leads to a more persistent, backward-looking inflation process, and is associated with lower output. We find that the extended model with credibility effects matches well the key macroeconomic data over specific past episodes for Indonesia and Philippines and consider its adaptation to integrated policy frameworks as an area for further exploration.

scholarly journals Central Bank Credibility, Independence, and Monetary Policy

2018 ◽  
Vol 7 (3) ◽  
pp. 91-110 ◽  
Author(s):  
Abdelkader Aguir
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Emerging Economies ◽  
Inflation Targeting ◽  
Central Bank Independence ◽  
Inflation Target ◽  
Central Bank Credibility

Abstract The main motives behind the adoption of an inflation targeting regime largely relate to the notion of credibility, transparency of monetary policy and the autonomy of the central bank, which explicitly undertakes to achieve a certain inflation target. This paper examines the effects of inflation targeting in emerging economies in relation to the degree of independence of the central bank and the credibility of monetary policy. We find effects in emerging economies with little central bank independence, so our findings suggest that the central bank’s credibility, transparency and independence is a prerequisite for emerging economies to experience a decline in inflation following the adoption of inflation targeting.

scholarly journals Achieving the Bank of Japan’s Inflation Target

2019 ◽  
Vol 19 (229) ◽  
Author(s):  
Gee Hee Hong ◽  
Rahul Anand ◽  
Yaroslav Hul
Keyword(s):  
Monetary Policy ◽  
Open Economy ◽  
Baseline Scenario ◽  
Unconventional Monetary Policy ◽  
Medium Term ◽  
Macroeconomic Policies ◽  
Inflation Target ◽  
Bank Of Japan ◽  
Positive Shock ◽  
Central Bank Credibility

The Bank of Japan has introduced various unconventional monetary policy tools since the launch of Abenomics in 2013, to achieve the price stability target of 2 percent inflation. In this paper, a forward-looking open-economy general equilibrium model with endogenously determined policy credibility and an effective lower bound is developed for forecasting and policy analysis (FPAS) for Japan. In the model’s baseline scenario, the likelihood of the Bank of Japan reaching its 2 percent inflation target over the medium term is below 40 percent, assuming the absence of other policy reactions aside from monetary policy. The likelihood of achieving the inflation target is even lower under alternative risk scenarios. A positive shock to central bank credibility increases this likelihood, and would require less accommodative macroeconomic policies.

scholarly journals MENINJAU KEMBALI SEBERAPA PENTING TARGET INFLASI BANK INDONESIA DALAM MENGONTROL LAJU INFLASI

2017 ◽  
Vol 20 (1) ◽  
pp. 53 ◽  
Author(s):  
Rachman Hakim
Keyword(s):  
Monetary Policy ◽  
Linear Regression ◽  
Gross Domestic Product ◽  
Multiple Linear Regression ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Inflation Expectations ◽  
Crucial Issue ◽  
Inflation Target ◽  
Policy Actors

Inflation is a crucial issue for a development country such as Indonesia. To solve the problem of inflation, Bank Indonesia as the monetary policy actors trying to adopt inflation targeting system. Every year Bank Indonesia announced its inflation target with the goal of keeping actual inflation will also lead there. However, the results obtained are less appropriate expectations for Bank Indonesia's inflation target is often off the mark. It is interesting to discuss the actual extent of the inflation target can affect the rate of inflation. Many disagreements related to it. This study wanted to reveal how the influence of the inflation target to actual inflation rate, especially in Indonesia. The method used is multiple linear regression. In addition to the inflation target, there are other variables to be studied its effect on the rate of actual inflation, ie inflation earlier period, inflation expectations and the Gross Domestic Product (GDP). The results showed that previous periods of inflation, inflation expectations and GDP significantly influence the rate of inflation. In contrast, Bank Indonesia's inflation target does not significantly influence the rate of inflation in Indonesia. This can happen due to the lack of credibility of Bank Indonesia in front of Indonesian, especially in the application of inflation targeting.

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.

scholarly journals Ambiguity, Monetary Policy, and Trend Inflation

2020 ◽  
Author(s):  
Riccardo M Masolo ◽  
Francesca Monti
Keyword(s):  
Monetary Policy ◽  
New Keynesian ◽  
Inflation Expectations ◽  
New Keynesian Model ◽  
Inflation Target ◽  
Keynesian Model ◽  
Long Run ◽  
Trend Inflation ◽  
The Us ◽  
Blue Chip

ABSTRACT Allowing for ambiguity about the behavior of the policymaker in a simple New-Keynesian model gives rise to wedges between long-run inflation expectations, trend inflation, and the inflation target. The degree of ambiguity we measure in Blue Chip survey data helps explain the dynamics of long-run inflation expectations and the inflation trend measured in the US data. Ambiguity also has implications for monetary policy. We show that it is optimal for policymakers to lean against the households’ pessimistic expectations, but also document the limits to the extent the adverse effects of ambiguity can be undone.

Credit Restriction or Economic Growth?

2019 ◽  
pp. 45-54
Author(s):  
E.Y. Sokolova ◽  
A.S. Tanasova
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Domestic Demand ◽  
Retirement Age ◽  
Inflation Expectations ◽  
Negative Consequences ◽  
Credit Restriction

At the end of 2018 — the very beginning of 2019 Russia faced negative consequences of the economic measures that took place in 2018, such as the retirement age rising, tightening sanctions against Russia, VAT rising which caused increased inflation expectations of people. The Bank of Russia increased the key rate in response. All these measures lead to decrease of domestic demand, and not stimulate economic growth. The article examines the possibility of using the monetary policy method of credit restriction to fulfil the presidential act to stimulate economic growth.

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