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Inflation Targeting and Fear of Floating

Author

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  • Reginaldo Pinto Nogueira Junior

    (University of Kent at Canterbury)

Abstract

The paper presents evidence on the “Fear of Floating†hypothesis in an Inflation Targeting regime. We use the methodologies of Calvo and Reinhart (2002) and Ball and Reyes (2004) for a set of developed and emerging market economies to examine the existence of a possible trend of greater exchange rate flexibility after the adoption of the new regime. This exercise shows a strong movement of the economies towards a more flexible exchange rate regime after the adoption of Inflation Targeting. We also analyse interventions in the foreign exchange market using a structural VAR, and conclude that although “Fear of Floating†cannot be totally discarded it is not the only explanation for interventions, as the exchange rate pass-through still is an important issue for the attainment of the inflation targets for many economies

Suggested Citation

  • Reginaldo Pinto Nogueira Junior, 2007. "Inflation Targeting and Fear of Floating," Money Macro and Finance (MMF) Research Group Conference 2006 27, Money Macro and Finance Research Group.
    • Handle: RePEc:mmf:mmfc06:27
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    More about this item

    Keywords

    Inflation Targeting; Exchange Rate Pass-through; Fear of Floating;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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