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Price Stability and Inflation Targeting in Commodity Economies: Macroeconomics versus a Political Economy?

Author

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  • Viktor Koziuk

    (Ternopil National Economic University
    National Bank of Ukraine)

Abstract

In this study, the author argues that maintaining price stability in commodity economies is influenced by their resource rent distribution, and that economic stability is extremely sensitive to the nature of a political regime. The commodity factor alone is shown not to be an impediment to maintaining price stability and implementing inflation targeting. An empirical analysis based on data from 68 resource-rich countries provides evidence that the link between the timing of the implementation of inflation targeting and resource wealth variables is not skewed towards resource-poor countries. This study finds that among democracies, inflation targeters demonstrate the best price stability parameters, the most flexible exchange rates, more independent central banks, and more diversified economies, while among autocracies, the best parameters are seen in countries that have sovereign wealth funds.

Suggested Citation

  • Viktor Koziuk, 2018. "Price Stability and Inflation Targeting in Commodity Economies: Macroeconomics versus a Political Economy?," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 244, pages 4-24.
    • Handle: RePEc:ukb:journl:y:2018:i:244:p:4-24
    DOI: 10.26531/vnbu2018.244.01
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    File URL: https://journal.bank.gov.ua/en/article/2018/244/01
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    References listed on IDEAS

    as
    1. Aizenman, Joshua & Hutchison, Michael & Noy, Ilan, 2011. "Inflation Targeting and Real Exchange Rates in Emerging Markets," World Development, Elsevier, vol. 39(5), pages 712-724, May.
    2. M. S. Mohanty & Marc Klau, 2005. "Monetary Policy Rules in Emerging Market Economies: Issues and Evidence," Springer Books, in: Rolf J. Langhammer & Lúcio Vinhas Souza (ed.), Monetary Policy and Macroeconomic Stabilization in Latin America, pages 205-245, Springer.
    3. José de Gregorio, 2012. "Commodity Prices, Monetary Policy and Inflation," Working Papers wp359, University of Chile, Department of Economics.
    4. Mr. Marco Airaudo & Mr. Edward F Buffie & Luis-Felipe Zanna, 2016. "Inflation Targeting and Exchange Rate Management In Less Developed Countries," IMF Working Papers 2016/055, International Monetary Fund.
    5. Corden, W M, 1982. "Exchange Rate Policy and the Resources Boom," The Economic Record, The Economic Society of Australia, vol. 58(160), pages 18-31, March.
    6. Ruslan Aliyev, 2014. "Determinants of the Choice of Exchange Rate Regime in Resource-Rich Countries," CERGE-EI Working Papers wp527, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
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    Cited by:

    1. Boateng, Ebenezer & Asafo-Adjei, Emmanuel & Addison, Alex & Quaicoe, Serebour & Yusuf, Mawusi Ayisat & Abeka, Mac Junior & Adam, Anokye M., 2022. "Interconnectedness among commodities, the real sector of Ghana and external shocks," Resources Policy, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Price stability; commodity economies; inflation targeting; political regimes; central bank independence;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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