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Can Inflation Targeting Work in Emerging Market Countries?

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  • Frederic S. Mishkin

Abstract

This paper explores issues in emerging market countries to make inflation targeting work for them. It starts by outlining why emerging market economies are so different from advanced economies and then discuss why developing strong fiscal, financial and monetary institutions is so critical to the success of inflation targeting in emerging market countries. Then it discusses two emerging market countries which illustrate what it takes to make inflation targeting work well, Chile and Brazil. It then addresses a particularly complicated issue for central banks in emerging market countries who engage in inflation targeting: how they deal with exchange rate fluctuations. The next topic focuses on the IMF's role in promoting the success of inflation targeting in emerging market countries. The conclusion from this analysis is that inflation targeting is more complicated in emerging market countries and is thus not a panacea. However, inflation targeting done right can be a powerful tool to help promote macroeconomic stability in these countries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10646.

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Date of creation: Jul 2004
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Publication status: published as Reinhart, Carmen, Carlos Vegh and Andres Velasco (eds.) A Festschrift for Guillermo Calvo. Cambridge, MA: MIT Press, 2008.
Handle: RePEc:nbr:nberwo:10646

Note: EFG IFM ME
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  1. The Failure of Inflation Targeting in Brazil
    by Pedro H. Albuquerque in Incentives Matter on 2009-03-19 16:57:00
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