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Inflation targeting and exchange market pressure in developing economies: Some international evidence

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  • Soe, Than Than
  • Kakinaka, Makoto

Abstract

This study examines how inflation targeting (IT) relates to the variabilities of exchange market pressure and its components over 101 developing countries, of which 16 are IT countries. Employing propensity score matching methods, we find that an IT regime helps stabilize exchange market pressure, and it reduces the volatility of changes in international reserves. This result reflects the argument that the policy commitment to an IT regime improves the credibility of monetary policy conduct, and thus monetary authorities would not be required to intervene in the foreign exchange market under an IT regime.

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  • Soe, Than Than & Kakinaka, Makoto, 2018. "Inflation targeting and exchange market pressure in developing economies: Some international evidence," Finance Research Letters, Elsevier, vol. 24(C), pages 263-272.
    • Handle: RePEc:eee:finlet:v:24:y:2018:i:c:p:263-272
    DOI: 10.1016/j.frl.2017.09.015
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    Cited by:

    1. Ozcelebi, Oguzhan, 2019. "Assessment of asymmetric effects on exchange market pressure: Empirical evidence from emerging countries," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 498-513.
    2. Ozcelebi, Oguzhan, 2020. "Assessing the impacts of financial stress index of developed countries on the exchange market pressure index of emerging countries," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 288-302.
    3. Bruno Ferreira Frascaroli & Wellington Charles Lacerda Nobrega, 2019. "Inflation Targeting and Inflation Risk in Latin America," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(11), pages 2389-2408, September.
    4. Senanu Kwasi Klutse & Judit Sági & Gábor Dávid Kiss, 2022. "Exchange Rate Crisis among Inflation Targeting Countries in Sub-Saharan Africa," Risks, MDPI, vol. 10(5), pages 1-13, May.
    5. Adina Ionela Străchinaru & Bogdan Andrei Dumitrescu, 2019. "Assessing the Sustainability of Inflation Targeting: Evidence from EU Countries with Non-EURO Currencies," Sustainability, MDPI, vol. 11(20), pages 1-13, October.
    6. Siklar Ilyas & Akca Aysegul, 2020. "Exchange Market Pressure and Monetary Policy: The Turkish Case," Ekonomika (Economics), Sciendo, vol. 99(1), pages 110-130, June.

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