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Bank of Thailand’s Inflation Targeting: Recent Performance and Future Challenges

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  • Veerathai Santiprabhob

    (Siam Commercial Bank Public Company Limited)

Abstract

This paper reviews Bank of Thailand (BOT)’s policy stance and performance since its official adoption of inflation targeting in May 2000. The paper argues that the BOT had established a credible inflation targeting framework. Core inflation had persistently turned out below the midpoint of the BOT’s target range, and bond yield curves had not reflected any evidence of inflation expectation. However, the BOT had been very passive in responding to adverse external shocks. Looking forward, the paper asks whether the BOT could be more accommodative to growth, while keeping core inflation within its target range, by lowering its policy benchmark interest rate. To avoid potential policy constraints in the long term, the paper argues that the BOT, together with the government, needs to (1) establish necessary legal and institutional foundation for inflation targeting; (2) ensure that fiscal discipline is maintained and FIDF’s contingent liabilities are managed in a transparent and accountable manner; and (3) press on with financial sector restructuring. The paper also raises a number of policy-related questions in which the BOT may wish to explain to the public in further details.

Suggested Citation

  • Veerathai Santiprabhob, 2001. "Bank of Thailand’s Inflation Targeting: Recent Performance and Future Challenges," Working Papers 2001-03, Monetary Policy Group, Bank of Thailand.
    • Handle: RePEc:bth:wpaper:2001-03
    as

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    File URL: http://www.bot.or.th/Thai/EconomicConditions/Semina/symposium/Document_LipSym4346/2544_P6.pdf
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    References listed on IDEAS

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    1. 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.
    2. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging-Market Countries," American Economic Review, American Economic Association, vol. 90(2), pages 105-109, May.
    3. Mishkin, Frederic S., 1998. "International Experiences With Different Monetary Policy Regimes," Seminar Papers 648, Stockholm University, Institute for International Economic Studies.
    4. Carare, Alina & Stone, Mark R., 2006. "Inflation targeting regimes," European Economic Review, Elsevier, vol. 50(5), pages 1297-1315, July.
    5. Mr. Mark Zelmer & Ms. Andrea Schaechter, 2000. "Adopting Inflation Targeting: Practical Issues for Emerging Market Countries," IMF Occasional Papers 2000/017, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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