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Inflation Targeting in the Context of IMF-Supported Adjustment Programs

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Author Info

  • Gerd Schwartz
  • Pau Rabanal
  • Mario I. Bléjer
  • Alfredo Mario Leone

Abstract

This paper argues that the IMF''s traditional monetary conditionality-a ceiling on net domestic assets of the central bank and a floor on its net international reserves-should be adapted in IMF-supported adjustment programs with countries which have a framework of explicit inflation targets for the implementation of monetary policy. This adaptation should aim at enhancing correspondence and consistency between the monetary objectives of the central bank and the targets established under the IMF-supported adjustment program, as well as between the different instruments used to achieve the policy objectives and targets. The paper reviews various general options in this regard, and, using the case of Brazil as an example, demonstrates how these options may be implemented in practice.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/31.

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Length: 24
Date of creation: 01 Mar 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/31

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Keywords: Inflation targeting; Conditionality; inflation; monetary policy; inflation target; central bank; inflation targeting framework; real interest rate; inflation rate; rate of inflation; monetary policies; actual inflation; monetary policy rules; expectations of inflation; monetary fund; aggregate demand; price inflation; monetary base; monetary objectives; nominal interest rate; monetary policy framework; inflation objective; foreign exchange; low inflation; monetary area; annual inflation; monetary policy frameworks; open market operations; monetary policy instrument; price level; reduction in inflation; monetary policy rule; inflation rates; real interest rates; monetary transmission; independent central bank; monetary transmission mechanism; forecasting inflation; monetary policy regime; monetary approach; money demand; real output; monetary expansion; transmission of monetary policy; inflation performance; macroeconomic performance; inflation targeting regime; increase in interest rates; monetary aggregates;

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Citations

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Cited by:
  1. Epstein, Gerald & Heintz, James & Ndikumana, Léonce & Chang, Grace, 2010. "Employment, poverty and economic development in Madagascar : a macroeconomic framework," ILO Working Papers 455446, International Labour Organization.
  2. John Hawkins, 2005. "Globalisation and monetary operations in emerging economies," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 59-80 Bank for International Settlements.
  3. Eric Parrado & Andrés Velasco, 2001. "Alternative Monetary Rules in the Open-Economy: a Welfare-Based Approach," Working Papers Central Bank of Chile 129, Central Bank of Chile.
  4. Epstein, Gerald, 2009. "Rethinking monetary and financial policy : practical suggestions for monitoring financial stability while generating employment and poverty reduction," ILO Working Papers 434439, International Labour Organization.
  5. Toprak, Metin, 2001. "Yükselen Piyasalarda Finansal Kriz
    [Financial Crises in Emerging Markets]
    ," MPRA Paper 9092, University Library of Munich, Germany, revised 2001.
  6. Dumitriu, Ramona & Stefanescu, Razvan, 2014. "Perspective ale ţintirii inflaţiei
    [Perspectives of the Inflation Targeting]
    ," MPRA Paper 52943, University Library of Munich, Germany, revised 14 Jan 2014.
  7. Easterly, William, 2006. "An identity crisis? Examining IMF financial programming," World Development, Elsevier, vol. 34(6), pages 964-980, June.
  8. Brigitte Granville & Sushanta Mallick*, 2006. "Integrating poverty reduction in IMF-World Bank Models," Working Papers id:502, eSocialSciences.
  9. Norman Loayza & Raimundo Soto, 2001. "Ten Years of Inflation Targeting: Design, Performance, Challenges," Working Papers Central Bank of Chile 131, Central Bank of Chile.
  10. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "A Practical Model-Based Approach to Monetary Policy Analysis: Overview," IMF Working Papers 06/80, International Monetary Fund.
  11. Tony Cavoli & Ramkishen S. Rajan, 2006. "Inflation Targeting Arrangements In Asia : Exploring The Role Of The Exchange Rate," Macroeconomics Working Papers 22564, East Asian Bureau of Economic Research.
  12. William R. Cline, 2003. "Restoring economic growth in Argentina," Policy Research Working Paper Series 3158, The World Bank.
  13. Gerald Epstein & James Heintz, 2006. "Monetary Policy and Financial Sector Reform for Employment Creation and Poverty Reduction in Ghana," Country Study 2, International Policy Centre for Inclusive Growth.
  14. Ilan Goldfajn & Poonam Gupta, 2001. "Overshootings and Reversals: The Role of Monetary Policy," Working Papers Central Bank of Chile 126, Central Bank of Chile.
  15. James M. Boughton, 2004. "The IMF and the force of History," IMF Working Papers 04/75, International Monetary Fund.
  16. James Heintz & Gerald Epstein, 2006. "Monetary Policy and Financial Sector Reform For Employment Creation and Poverty Reduction in Ghana," Working Papers wp113, Political Economy Research Institute, University of Massachusetts at Amherst.
  17. Gerald Epstein & James Heintz & Léonce Ndikumana & Grace Chang, 2011. "Employment, Poverty and Economic Development in Madagascar," Published Studies ndikumana_ilo2010, Political Economy Research Institute, University of Massachusetts at Amherst.
  18. Gerald Epstein, 2009. "Rethinking Monetary and Financial Policy: Practical suggestions for monitoring financial stability while generating employment and poverty reduction," Published Studies ilo_epstein11_09, Political Economy Research Institute, University of Massachusetts at Amherst.
  19. Carlos José García & Jorge Enrique Restrepo, 2001. "Price Inflation and Exchange Rate Pass-Through in Chile," Working Papers Central Bank of Chile 128, Central Bank of Chile.
  20. Victor, Olivo, 2007. "El Régimen de Metas de Inflación en Brasil: Breve Descripción y Evaluación de su Desempeño
    [Brazil's Inflation Targeting Regime: Brief Description and Evaluation of its Performance]
    ," MPRA Paper 41405, University Library of Munich, Germany.

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