IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The Effects of Inflation Targeting on the Current Account: An Empirical Examination

  • Cesar R Sobrino

    ()

    (Universidad del Turabo)

Empirical studies have found that inflation targeting leads to a fall in real interest rate, macroeconomic uncertainty, exchange rate volatility, and output volatility. Economic theory suggests that those elements should lead to a rise in investment and a fall in private savings. However, Rose (2007) reports very little association between current account and inflation targeting. This paper examines the effect of inflation targeting on current account. The results show that, consistent with economic theory, inflation targeting does negatively affect current account once global shocks have been properly accounted for. This evidence implies that exchange rate and balance of payment crises should not lead inflation targeting per se.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P103.pdf
Download Restriction: no

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 2 ()
Pages: 1105-1112

as
in new window

Handle: RePEc:ebl:ecbull:eb-09-00414
Contact details of provider:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Thorarinn G. Petursson, 2005. "Inflation Targeting and its Effects on Macroeconomic Performance," SUERF Studies, SUERF - The European Money and Finance Forum, number 2005/5 edited by Morten Balling, 00.
  2. Ghosh, Atish R. & Ostry, Jonathan D., 1997. "Macroeconomic uncertainty, precautionary saving, and the current account," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 121-139, September.
  3. Rose, Andrew K., 2007. "A stable international monetary system emerges: Inflation targeting is Bretton Woods, reversed," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 663-681, September.
  4. Andrew T. Levin & Fabio M. Natalucci & Jeremy M. Piger, 2004. "The macroeconomic effects of inflation targeting," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 51-80.
  5. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
  6. Gürkaynak, Refet S. & Levin, Andrew & Swanson, Eric T, 2006. "Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the US, UK and Sweden," CEPR Discussion Papers 5808, C.E.P.R. Discussion Papers.
  7. Menzie David Chinn & Eswar Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," IMF Working Papers 00/46, International Monetary Fund.
  8. Calderon Cesar Augusto & Chong Alberto & Loayza Norman V., 2002. "Determinants of Current Account Deficits in Developing Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-33, March.
  9. Vittorio Corbo & Klaus Schmidt-Hebbel, 2002. "Inflation Targeting in Latin America," Documentos de Trabajo 230, Instituto de Economia. Pontificia Universidad Católica de Chile..
  10. Klaus Schmidt-Hebbel & Alejandro M. Werner, 2002. "Inflation Targeting in Brazil, Chile, and Mexico: Performance, Credibility, and the Exchange Rate," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 31-90, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-09-00414. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.