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Inflation targeting at the crossroads: Evidence from post-communist economies during the crisis

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  • Petreski, Marjan

Abstract

The objective of this paper is to assess if inflation targeting post-communist economies performed better, in terms of output growth, during the crisis than their non-inflation targeting counterparts. The paper also puts the issue in the context of the preconditions of inflation targeters to adopt this regime. 26 post-communist economies of Central and Eastern Europe and the Commonwealth of Independent States are analyzed during the ongoing economic crisis. Results suggest that inflation targeters of those countries performed worse than non-inflation targeters. The growth decline in inflation targeters post-communist economies has been estimated to be deeper by about four percentage points than that in non-inflation targeters. The study finds very limited role of the preconditions for growth decline. Only the lower amount of monetary financing of the budget may have contributed in inflation-targeting countries to have gone through the crisis better.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 47018.

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Date of creation: 2013
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Handle: RePEc:pra:mprapa:47018

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Keywords: inflation targeting; pre-conditions for adoption; post-communist economies;

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  1. Marjan Petreski, 2011. "A Markov Switch to Inflation Targeting in Emerging Market Peggers with a Focus on the Czech Republic, Poland and Hungary," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3.
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  3. Frederic S. Mishkin, 2011. "Monetary Policy Strategy: Lessons from the Crisis," NBER Working Papers 16755, National Bureau of Economic Research, Inc.
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  17. Frederic S. Mishkin, 2004. "Why the Federal Reserve Should Adopt Inflation Targeting," International Finance, Wiley Blackwell, vol. 7(1), pages 117-127, 03.
  18. Goncalves, Carlos Eduardo S. & Salles, Joao M., 2008. "Inflation targeting in emerging economies: What do the data say?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 312-318, February.
  19. Miguel A. Savastano & Paul R. Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  20. Armand Fouejieu A., 2013. "Coping with the recent financial crisis: Did inflation targeting make any difference?," Economie Internationale, CEPII research center, issue 133, pages 72-92.
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  22. Ankita Mishra & Vinod Mishra, 2009. "Pre-Conditions For Inflation Targeting In An Emerging Economy - The Case Of India," Development Research Unit Working Paper Series 08-09, Monash University, Department of Economics.
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