Inflation Targeting to Achieve Inflation Convergence in the Transition Towards EMU
AbstractIn this paper we analyse the use of inflation targeting as a device to facilitate inflation convergence of countries outside EMU to the EMU-inflation rate, and compare it with exchange rate pegging. We find that inflation targeting suffers from a similar credibility problem as a policy of exchange rate pegging. We also find, however, that inflation targeting is inherently more sustainable than exchange rate pegging. This relates to the fact that a lack of credibility of the exchange rate peg spills over into an increasing appreciation of the currency, inviting speculative attacks and a collapse of the exchange rate peg. Inflation targeting can avoid such situations. Despite the advantages inflation targeting remains plagued by serious credibility issues. In order to reduce these problems and thereby facilitate the convergence process (by high-inflation countries), we propose to combine inflation targeting with the Rogoff-proposal to appoint a conservative central banker.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1457.
Date of creation: Sep 1996
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Lossani, M. & Natale, P. & Tirelli, P., 2003.
"A nominal income growth target for a conservative ECB? When the policy mix matters,"
Journal of Policy Modeling,
Elsevier, vol. 25(8), pages 685-699, November.
- Marco Lossani & Piergiovanna Natale & Patrizio Tirelli, 2000. "A Nominal Income Growth Target for a Conservative ECB? When the policy mix matters," Working Papers 32, University of Milano-Bicocca, Department of Economics, revised Oct 2000.
- Alexis Penot, 1998. "La politique monétaire française à travers la règle de Taylor," Revue d'Économie Financière, Programme National Persée, vol. 49(5), pages 135-154.
- Lossani, Marco & Natale, Piergiovanna & Tirelli, Patrizio, 2000.
"Fiscal Policy and Inflation Targets: Does Credibility Matters?,"
18693, University Library of Munich, Germany.
- Lossani Marco & Natale Piergiovanna & Tirelli Patrizio, 2001. "Fiscal Policy and Inflation Targets: Does Credibility Matter?," Economia politica, Società editrice il Mulino, issue 3, pages 371-392.
- Devine, Máiréad & McCoy, Daniel, 1997. "Inflation Targeting: A Review of the Issues," Research Technical Papers 5/RT/97, Central Bank of Ireland.
- Orlowski, Lucjan T., 2001. "From inflation targeting to the euro-peg: A model of monetary convergence for transition economies," Economic Systems, Elsevier, vol. 25(3), pages 233-251, September.
- Gianni Amisano & Marco Tronzano, 2005. "Assessing ECB?s Credibility During the First Years of the Eurosystem: A Bayesian Empirical Investigation," Working Papers ubs0512, University of Brescia, Department of Economics.
- Marco Lossani & Piergiovanna Natale & Patrizio Tirelli, 1997. "Do we really need to tame a conservative ECB? When the policy mix matters," Working Papers 18, University of Milano-Bicocca, Department of Economics, revised Nov 1998.
- M. Lossani & P. Natale, & P. Tirelli, 1997. "Fiscal Policy and Imperfectly Credible Inflation Targets: Should We Appoint Expenditure-Conservative Central Bankers?," Working Papers 9707, Business School - Economics, University of Glasgow.
- Iannis A. Mourmouras & Michael G. Arghyrou, 1999. "Monetary Policy at the European Periphery. Greek Experience and Lessons for Transition Economies," CERT Discussion Papers 9910, Centre for Economic Reform and Transformation, Heriot Watt University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.