scholarly journals Inflation Targeting in Emerging Market Countries

2007 ◽  
Keyword(s):  
Inflation Targeting ◽  
Emerging Market ◽  
Emerging Market Countries

scholarly journals Patterns of Foreign Exchange Intervention under Inflation Targeting

2020 ◽  
Vol 20 (69) ◽  
Author(s):  
Gustavo Adler ◽  
Kyun Suk Chang ◽  
Zijiao Wang
Keyword(s):  
Foreign Exchange ◽  
Inflation Targeting ◽  
Foreign Currency ◽  
Emerging Market ◽  
Policy Instrument ◽  
Emerging Market Economies ◽  
Foreign Exchange Intervention ◽  
Market Economies ◽  
Monetary Regimes ◽  
Emerging Market Countries

The paper documents the use of foreign exchange intervention (FXI) across countries and monetary regimes, with special attention to its use under inflation targeting (IT). We find significant differences between advanced and emerging market economies, with the former group conducting FXI limitedly and broadly symmetrically, while the use of this policy instrument in emerging market countries is pervasive and mostly asymmetric (biased towards purchasing foreign currency, even after taking into account precautionary motives). Within emerging markets, the use of FXI is common both under IT and non-IT regimes. We find no evidence of FXI being used in response to inflation developments, while there is strong evidence that FXI responds to exchange rates, indicating that IT central banks in EMDEs have dual inflation/exchange rate objectives. We also find a higher propensity to overshoot inflation targets in emerging market economies where FXI is more pervasive.

scholarly journals Inflation targeting challenges in emerging market countries: The case of Serbia

2015 ◽  
Vol 60 (204) ◽  
pp. 7-30 ◽  
Author(s):  
Dejan Soskic
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Emerging Market ◽  
Institutional Development ◽  
Policy Framework ◽  
Fiscal Discipline ◽  
Emerging Market Countries ◽  
Monetary Regime ◽  
Developed Nations ◽  
Monetary Policy Framework

In the past two decades Inflation targeting has been the monetary policy framework of choice for many developed nations around the world. A significant number of emerging market countries have gradually subscribed to the same monetary regime, but with different levels of success. Certain differences among emerging markets in terms of overall macroeconomic environment, strength of basic monetary policy tools, and institutional development have had an effect on the performance of inflation targeting. This paper focuses on the fulfilment of basic preconditions for implementation of inflation targeting in emerging market countries, and on results and challenges of inflation targeting implementation in Serbia more than six years after its introduction. Special attention is paid to high dollarization (euroization), which poses a serious challenge for inflation targeting, and to modification of the Taylor rule for dollarized economies. For inflation targeting in Serbia to be more effective, a (gradual) decrease in overall dollarization (euroization), fiscal discipline and sustainability, and an increase in the independence and capacity of the central bank are needed, among other things.

scholarly journals INFLATION TARGETING IN THE COUNTRIES WITH MIDDLE AND LOW INCOME: TRADITIONAL DILEMES AND POST-CRISIS CHALLENGES

2019 ◽  
pp. 8-22
Author(s):  
Viktor KOZYUK
Keyword(s):  
Exchange Rates ◽  
Inflation Targeting ◽  
Emerging Market ◽  
Inflation Expectations ◽  
Supply Side ◽  
Structural Reforms ◽  
Macroprudential Policy ◽  
Core Inflation ◽  
Emerging Market Countries ◽  
Inflation Targets

Introduction. It is focused on the problem inflation targeting regime evolvement in emerging market countries. The generalization of key problems is done relying on literature review and overview of empirical works. Purpose of the paper is to show how the way of thinking about inflation targeting in emerging market countries is changed according to they economic and financial development as well as they connections with global economy. It is distinct some the most disputable and progressmade arrears of inflation targeting in less developed countries: connections between price and exchange rate stability; reactions on the supply-side shocks; institutional drivers of deviations from the targets; cointegration between inflation targeting and macroprudential policy. It is fount the more country advanced in the structural reforms the less sensitive price stability to exchange rates movements is and term-of-trade shocks more resemble supply-side shocks. But central banks from emerging market countries couldn’t stay neglect of supply-side shocks because of more sensitive inflation expectations to core-inflation reaction on non-core inflation behavior. While commodity shocks may easily deteriorate movements of the most volatile components of price index supply-side shocks are more like persistent in nature. Not to react on them according to orthodox New-Keynesian theory is very risky especially then inflation expectations are not strongly anchored. Results. Deviations from inflation targets are viewed from institutional position meaning that political environment as well as factual central bank’s independence is important and markets flexibility, that minimizes costs of stronger reaction on price shocks, is a consequence of structural reforms. Financial stability in emerging markets is viewed from capital flows and exchange rates volatility perspective that may bring additional conflicts with inflation targets. Conclusions. It is stressed that monetary policy in emerging markets will benefited from more active approach on financial imbalances. That is why inflation targeting with pro-active macroprudential policy is shown as example of relevant policy-mix for better macroeconomic performance.

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.

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