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Inflation Targeting, Full Employment and Long-run Economic Growth: The Case of Serbia

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  • Gradimir Kozetinac

    ()
    (Belgrade Banking Academy)

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    Abstract

    In the preceding period, like nowadays, inflation targeting as a strategic frame for implementing monetary policy is subject to critics from the economists. Those critics refer primarily to an excessive focusing of the creators of monetary policy to “inflation only” targeting and neglecting considerations about production (i.e. employment). The central banks – inflation targeters demonstrate an increased aversion towards the fluctuations of inflation rate, and a lesser dislike regarding the fluctuations in the flows of production. From the theoretical perspective, even if the “strict” inflation target was adopted, the considerations regarding the movements of the total production in an economy are still important, due to the crucial role of production in determining future inflation. The central bank should possess a variable of production in its reaction function. The inflation target is in the center of monetary policy of the National bank of Serbia. The realization of the regime of inflation targeting in practice started in the last quarter of 2006. After four years of experience with the regime of inflation targeting, the evidence of its total effects (namely, from the aspect of inflation stabilization, and regarding stabilization of production and employment) is less encouraging, and far more providing a reason of discontent

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    This chapter was published in:

  • Stefan Bogdan Salej & Dejan Eric & Srdjan Redzepagic & Ivan Stosic (ed.), 2011. "Contemporary Issues in the Integration Processes of Western Balkan Countries in the European Union," Books, Institute of Economic Sciences, number conissue, December.
    This item is provided by Institute of Economic Sciences in its series Book Chapters with number conissue-20.

    Handle: RePEc:ibg:chaptr:conissue-20

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    Related research

    Keywords: Monetary policy; central bank; inflation targeting; output stabilisation; economic growth;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Gerald Epstein & Erinc Yeldan, 2008. "Inflation targeting, employment creation and economic development: assessing the impacts and policy alternatives," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 131-144.
    2. Joshua Aizenman & Michael Hutchison & Ilan Noy, 2008. "Inflation Targeting and Real Exchange Rates in Emerging Markets," Working Papers 200810, University of Hawaii at Manoa, Department of Economics.
    3. Stephen G. Cecchetti & Michael Ehrmann, 2002. "Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 9, pages 247-274 Central Bank of Chile.
    4. Goncalves, Carlos Eduardo S. & Salles, Joao M., 2008. "Inflation targeting in emerging economies: What do the data say?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 312-318, February.
    5. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One decade of inflation targeting in the world : What do we know and what do we need to know?," Working Papers Central Bank of Chile 101, Central Bank of Chile.
    6. Scott Roger & Mark R. Stone, 2005. "On Target? the International Experience with Achieving Inflation Targets," IMF Working Papers 05/163, International Monetary Fund.
    7. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging Market Countries," NBER Working Papers 7618, National Bureau of Economic Research, Inc.
    8. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
    9. Robert Pollin & Andong Zhu, 2006. "Inflation and economic growth: a cross-country nonlinear analysis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(4), pages 593-614, July.
    10. Minella, Andre & de Freitas, Paulo Springer & Goldfajn, Ilan & Muinhos, Marcelo Kfoury, 2003. "Inflation targeting in Brazil: constructing credibility under exchange rate volatility," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 1015-1040, December.
    11. M. H. Khalil Timamy, 2005. "Debate," Review of African Political Economy, Taylor & Francis Journals, vol. 32(104-105), pages 383-393, June.
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