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The feasibility of adopting inflation targeting in Malawi: an empirical analysis

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  • Kisu Simwaka

    (Reserve Bank of Malawi, P.O. Box 30063, Lilongwe, Malawi)

Abstract

This study attempts to examine the minimum requirements for adopting an inflation targeting framework in Malawi. First, we examined four pre- requisites of an inflation targeting framework: a fairy long track record of low and stable inflation; a degree of independence; having a sole target; and the existence of a predictable and stable relationships between monetary policy and inflation outcomes. The findings indicate that while the requirement of having a sole target has been satisfied, there are still problems associated with the Reserve Bank of Malawi’s independence and the existence of stable and predictable relationship between monetary policy instruments and inflation in Malawi. Therefore, Malawi is yet to reach a stage where a fully-fledged inflation targeting framework could be incorporated into its overall strategy. Keywords: Inflation targeting; central bank independence; vector autoregression Authors’ E-Mail Address: ksimwaka@rbm.malawi.net

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0407015.

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Length: 50 pages
Date of creation: 16 Jul 2004
Date of revision:
Handle: RePEc:wpa:wuwpma:0407015

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Keywords: Inflation targeting; central bank independence; vector autoregression;

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  1. G. C. Lim & Guy Debelle, 1998. "Preliminary Considerations of an Inflation Targeting Framework for the Philippines," IMF Working Papers 98/39, International Monetary Fund.
  2. Ferya Kadioglu & Nilufer Ozdemir & Gokhan Yilmaz, 2000. "Inflation Targeting in Developing Countries," Discussion Papers 0006, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  3. 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.
  4. Richard T. Freeman & Jonathan L. Willis, 1995. "Targeting inflation in the 1990s: recent challenges," International Finance Discussion Papers 525, Board of Governors of the Federal Reserve System (U.S.).
  5. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110.
  6. Laura Papi & G. C. Lim, 1997. "An Econometric Analysis of the Determinants of Inflation in Turkey," IMF Working Papers 97/170, International Monetary Fund.
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