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Inflation Targeting and the Crisis

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  • Irineu E. Carvalho Filho

Abstract

This paper appraises how countries with inflation targeting fared during the current crisis, with the goal of establishing the stylized facts that will guide and motivate future research. We find that since August 2008, IT countries lowered nominal policy rates by more and this loosening translated into an even larger differential in real interest rates relative to other countries; were less likely to face deflation scares; and saw sharp real depreciations not associated with a greater perception of risk by markets. We also find some weak evidence that IT countries did better on unemployment rates and advanced IT countries have had relatively stronger industrial production performance. Finally, we find that advanced IT countries had higher GDP growth rates than their non-IT peers, but find no such difference for emerging countries or the full sample.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/45.

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Length: 22
Date of creation: 01 Feb 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/45

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Related research

Keywords: Inflation targeting; Monetary policy; Economic growth; Emerging markets; Flexible exchange rates; Global Financial Crisis 2008-2009; Industrial production; Real effective exchange rates; Unemployment; Prices; inflation; terms of trade; real interest rates; monetary economics; nominal interest rates; inflation rate; inflation rates; low inflation; monetary fund; effective exchange rates; monetary frameworks; monetary framework; price stability; inflation-targeting; monetary policy frameworks; expectations of inflation; inflation targeting framework; monetary regime; monetary regimes; monetary policy regime; terms of trade shock; optimal monetary policy; real interest rate; monetary policy framework; real exchange rates; inflation targeting regime; inflation target; tight monetary policy; monetary policy regimes; central bank;

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Citations

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Cited by:
  1. Carlos A. Carrasco & Jesús Ferreiro, 2011. "Inflation Targeting and Economic Performance: The Case of Mexico," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(5), pages 675-692, December.
  2. Berganza, Juan Carlos & Broto, Carmen, 2011. "Flexible inflation targets, forex interventions and exchange rate volatility in emerging countries," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 9/2011, Bank of Finland, Institute for Economies in Transition.
  3. Kenji Moriyama, 2011. "Inflation Inertia in Egypt and its Policy Implications," IMF Working Papers 11/160, International Monetary Fund.
  4. Joseph D. ALBA & Wai–Mun CHIA & Donghyun PARK, 2011. "Foreign Output Shocks and Monetary Policy Regimes in Small Open Economies: A DSGE Evaluation of East Asia," Economic Growth centre Working Paper Series, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre 1105, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  5. Svensson, Lars E.O., 2010. "Inflation Targeting," Handbook of Monetary Economics, Elsevier, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 22, pages 1237-1302 Elsevier.
  6. Alba, Joseph D. & Chia, Wai-Mun & Park, Donghyun, 2012. "A Welfare Evaluation of East Asian Monetary Policy Regimes under Foreign Output Shock," ADB Economics Working Paper Series 299, Asian Development Bank.
  7. Juan José Echavarría & Andrés González & Enrique López & Norberto Rodíguez, 2012. "Choques internacionales reales y financieros y su impacto sobre la economía colombiana," Borradores de Economia 728, Banco de la Republica de Colombia.
  8. Armand Fouejieu Azangue, 2012. "Coping with the Recent Financial Crisis, did Inflation Targeting Make Any Difference?," Working Papers, HAL halshs-00826277, HAL.
  9. Petreski, Marjan, 2013. "Inflation targeting at the crossroads: Evidence from post-communist economies during the crisis," MPRA Paper 47018, University Library of Munich, Germany.
  10. Jean Louis, Rosmy & Balli, Faruk, 2013. "Low-inflation-targeting monetary policy and differential unemployment rate: Is monetary policy to be blamed for the financial crisis? — Evidence from major OECD countries," Economic Modelling, Elsevier, Elsevier, vol. 30(C), pages 546-564.
  11. Carlos A. Carrasco & Jesus Ferreiro, 2013. "Inflation targeting in Mexico," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 35(3), pages 341-372, April.
  12. Juan José Echavarría & Luis Fernando Melo & Santiago Téllez & Mauricio Villamizar, 2013. "The impact of pre-announced day-to-day interventions on the Colombian exchange rate," BIS Working Papers 428, Bank for International Settlements.
  13. Felipe Jaque S. & Alfredo Pistelli M, 2011. "Impacto de la Crisis Financiera Global del 2008-09: ¿Qué Explica las Diferencias de Crecimiento entre Países?," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, Central Bank of Chile, vol. 14(1), pages 69-78, April.
  14. Anwar, Sarah & Islam, Iyanatul, 2011. "Should developing countries target low, single digit inflation to promote growth and employment," ILO Working Papers, International Labour Organization 464250, International Labour Organization.
  15. Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2010. "Weathering the financial storm: The importance of fundamentals and flexibility," Economics Working Papers, School of Economics and Management, University of Aarhus 2010-17, School of Economics and Management, University of Aarhus.

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