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Credibility and Inflation Targeting in an Emerging Market: Lessons from the Chilean Experience

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  • Luis F. Céspedes
  • Claudio Soto

Abstract

This paper assesses the challenges that the lack of credibility poses for the implementation of inflation targeting, and for the design of inflation stabilization processes in emerging market economies. We also discuss the role that credibility has played in rationalizing the main elements of the disinflationary process in Chile during the 1990s and in explaining the grounds behind the monetary policy framework's changes in Chile at the end of the last decade.

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  • Luis F. Céspedes & Claudio Soto, 2005. "Credibility and Inflation Targeting in an Emerging Market: Lessons from the Chilean Experience," International Finance, Wiley Blackwell, vol. 8(3), pages 545-575, December.
    • Handle: RePEc:bla:intfin:v:8:y:2005:i:3:p:545-575
    DOI: 10.1111/j.1468-2362.2005.00169.x
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    Cited by:

    1. Saborowski, Christian, 2010. "Inflation targeting as a means of achieving disinflation," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2510-2532, December.
    2. Vasco Cúrdia, 2005. "Monetary Policy under Sudden Stops," International Finance 0510025, University Library of Munich, Germany, revised 19 Dec 2005.
    3. Carlos García & Jorge Restrepo & Scott Roger, 2009. "Hybrid Inflation Targeting Regimes," Working Papers Central Bank of Chile 533, Central Bank of Chile.
    4. Carlos Garcia & Jorge Restrepo & Mr. Scott Roger, 2009. "Hybrid Inflation Targeting Regimes," IMF Working Papers 2009/234, International Monetary Fund.
    5. M. Ayhan Kose & Hideaki Matsuoka & Ugo Panizza & Dana Vorisek, 2019. "Inflation Expectations: Review and Evidence," Koç University-TUSIAD Economic Research Forum Working Papers 1904, Koc University-TUSIAD Economic Research Forum.
    6. Luis F. Céspedes & Marcelo Ochoa & Claudio Soto, 2005. "The New Keynesian Phillips Curve in an Emerging Market Economy: The Case of Chile," Working Papers Central Bank of Chile 355, Central Bank of Chile.
    7. Carlos Garcia & Jorge Restrepo & Scott Roger, 2009. "Hybrid Inflation Targeting Regimes1," ILADES-UAH Working Papers inv226, Universidad Alberto Hurtado/School of Economics and Business.
    8. A. R. Pagan & Mr. Douglas Laxton & Mr. Luis Catão, 2008. "Monetary Transmission in an Emerging Targeter: The Case of Brazil," IMF Working Papers 2008/191, International Monetary Fund.
    9. Luis F. Céspedes & Claudio Soto, 2007. "Credibility and Inflation Targeting in Chile," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 14, pages 547-578, Central Bank of Chile.
    10. John McDermott & Peter McMenamin, 2008. "Assessing Inflation Targeting in Latin America With a DSGE Model," Working Papers Central Bank of Chile 469, Central Bank of Chile.
    11. Luis A.V. Catão & Adrian Pagan, 2011. "The Credit Channel and Monetary Transmission in Brazil and Chile: A Structured VAR Approach," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Felipe Céspedes & Roberto Chang & Diego Saravia (ed.),Monetary Policy under Financial Turbulence, edition 1, volume 16, chapter 5, pages 105-144, Central Bank of Chile.
    12. Helder Ferreira de Mendonça, 2009. "Output‐inflation and unemployment‐inflation trade‐offs under inflation targeting," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 36(1), pages 66-82, January.
    13. Francisco J. S. Rocha & Marcos R. V. Magalhaes & Ã tila Amaral Brilhante, 2022. "A BVAR Analysis on Channels of Monetary Policy Transmission in Brazil," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(3), pages 1-19, February.
    14. Mr. Scott Roger, 2009. "Inflation Targeting at 20 - Achievements and Challenges," IMF Working Papers 2009/236, International Monetary Fund.
    15. Luis F. Céspedes C. & Claudio Soto G., 2006. "Inflation Targeting And Monetary Policy Credibility In Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(3), pages 53-70, December.

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