Inflation Targeting in Financially Stable Economies: Has it Been Flexible Enough?
In: Monetary Policy under Financial Turbulence
AbstractThe financial crisis and recession of 2008-2009 required significant policy responses by central banks. For formal inflation targeters (IT), a natural question arises about whether IT frameworks were flexible enough to address this unprecedented policy environment. We address this question by assessing the policy responses to the crisis of nine IT central banks that did not face systemic problems in their financial systems. We document substantial deviations of actual policy responses from prescriptions of conventional monetary policy reaction functions, a fact which we more easily reconcile with a decline in the persistence of monetary policy. We also provide evidence on the overall impact of non-monetarypolicy measures on the exchange rate and money market.
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This chapter was published in: Luis Felipe Céspedes & Roberto Chang & Diego Saravia (ed.) Monetary Policy under Financial Turbulence, , chapter 01, pages 283-368, 2011.
This item is provided by Central Bank of Chile in its series Central Banking, Analysis, and Economic Policies Book Series with number v16c09pp283-368.
Other versions of this item:
- Mauricio Calani C. & Kevin Cowan L. & Pablo García S., 2010. "Inflation Targeting in Financially Stable Economies: Has it been Flexible Enough?," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 13(2), pages 11-50, August.
- Mauricio Calani & Kevin Cowan & Pablo García S., 2010. "Inflation Targeting in Financially Stable Economies: Has it been Flexible Enough?," Working Papers Central Bank of Chile 587, Central Bank of Chile.
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