Implications of ERM2 for Poland's monetary policy
This study proposes an extension to the inflation targeting framework for Poland that takes into consideration the exchange rate stability constraints imposed by the obligatory participation in the ERM2 on the path to the euro. The modified policy framework is based on targeting the differential between the domestic and the implicit euro area inflation forecasts. The exchange rate stability objective enters the central bank reaction function and is treated as an indicator variable. Adjustments of interest rates respond to changes in the relative inflation forecast, while foreign exchange market intervention is applied for the purpose of stabilizing the exchange rate. The dynamic market equilibrium exchange rate is ascertained by employing the Johanssen cointegration tests and the threshold generalized autoregressive heteroscedasticity model with the in-mean extension and generalized error distribution (TGARCH-M-GED).
(This abstract was borrowed from another version of this item.)
Volume (Year): 30 (2006)
Issue (Month): 4 (December)
|Contact details of provider:|| Postal: Landshuter Str. 4, 93047 Regensburg|
Phone: +49-(0)941-943 54 10
Fax: +49-(0)941-943 54 27
Web page: http://www.elsevier.com/locate/inca/621171
More information through EDIRC
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.:
- Kutan, Ali M. & Yigit, Taner M., 2004. "Nominal and real stochastic convergence of transition economies," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 23-36, March.
- Kutan, Ali M. & Yigit, Taner M., 2002. "Nominal and real stochastic convergence within transition economies and to the European Union: Evidence from panel data," ZEI Working Papers B 21-2002, University of Bonn, ZEI - Center for European Integration Studies.
- Peter B. Kenen & Ellen E. Meade, 2003. "EU Accession and the Euro: Close Together or Far Apart?," Policy Briefs PB03-09, Peterson Institute for International Economics.
- Lars E. O. Svensson, 2003.
"What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules,"
Journal of Economic Literature,
American Economic Association, vol. 41(2), pages 426-477, June.
- Lars E. O. Svensson, 2003. "What is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," NBER Working Papers 9421, National Bureau of Economic Research, Inc.
- federico ravenna & fabio natalucci, 2003.
"the road to adopting the euro: monetary policy and exchange rate regimes in EU candidate countries,"
Computing in Economics and Finance 2003
227, Society for Computational Economics.
- Fabio M. Natalucci & Federico Ravenna, 2002. "The road to adopting the euro: monetary policy and exchange rate regimes in EU candidate countries," International Finance Discussion Papers 741, Board of Governors of the Federal Reserve System (U.S.).
- Lucjan T Orlowski, 2005.
"Exchange Rate Risk and Convergence to the Euro,"
- Laurence M. Ball, 1999.
"Policy Rules for Open Economies,"
in: Monetary Policy Rules, pages 127-156
National Bureau of Economic Research, Inc.
- Jonas, Jiri, 2004. "Euro adoption and Maastricht criteria: Rules or discretion?," ZEI Working Papers B 14-2004, University of Bonn, ZEI - Center for European Integration Studies.
- Lars E.O. Svensson & Michael Woodford, 2000.
"Indicator Variables for Optimal Policy,"
NBER Working Papers
7953, National Bureau of Economic Research, Inc.
- Svensson, Lars E. O. & Woodford, Michael, 2003. "Indicator variables for optimal policy," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 691-720, April.
- Lars E. O. Svensson & Michael Woodford, 2000. "Indicator variables for optimal policy," Proceedings, Federal Reserve Bank of San Francisco.
- Svensson, Lars & Woodford, Michael, 2000. "Indicator Variables for Optimal Policy," Seminar Papers 688, Stockholm University, Institute for International Economic Studies.
- Svensson, Lars E. O. & Woodford, Michael, 2000. "Indicator variables for optimal policy," Working Paper Series 0012, European Central Bank.
- Orlowski, Lucjan T., 2004. "Money rules for monetary convergence to the euro," Journal of Policy Modeling, Elsevier, vol. 26(7), pages 817-837, October.
- Engle, Robert F & Ng, Victor K, 1993.
" Measuring and Testing the Impact of News on Volatility,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1749-78, December.
- Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
- Andrew Haldane, 1997. "Some Issues in Inflation Targeting," Bank of England working papers 74, Bank of England.
- György Szapáry, 2000. "Maastricht and the Choice of Exchange Rate Regime in Transition Countries During The Run-Up to EMU," MNB Working Papers 2000/7, Magyar Nemzeti Bank (Central Bank of Hungary).
- Ben Hunt, 1999. "Inter-forecast monetary policy implementation: fixed-instrument versus MCI-based strategies," Reserve Bank of New Zealand Discussion Paper Series G99/1, Reserve Bank of New Zealand.
- Kocenda, Evzen & Kutan, Ali M. & Yigit, Taner M., 2006.
"Pilgrims to the Eurozone: How far, how fast?,"
Elsevier, vol. 30(4), pages 311-327, December.
- Evzen Kocenda & Ali M. Kutan & Taner M. Yigit, 2005. "Pilgrims to the Eurozone: How Far, How Fast?," CERGE-EI Working Papers wp279, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
- Evzen Kocenda & Ali M. Kutan & M. Taner Yigit, 2005. "Pilgrims to Eurozone: How Far, How Fast," Working Papers 0501, Department of Economics, Bilkent University.
- Jesús Crespo-Cuaresma & Balázs Égert & Ronald MacDonald, 2005.
"Non-Linear Exchange Rate Dynamics in Target Zones: A Bumpy Road Towards A Honeymoon Some Evidence from the ERM, ERM2 and Selected New EU Member States,"
William Davidson Institute Working Papers Series
wp771, William Davidson Institute at the University of Michigan.
- Jesús Crespo-Cuaresma & Balázs Egert & Ronald MacDonald, 2005. "Non-Linear Exchange Rate Dynamics in Target Zones: A Bumpy Road towards a Honeymoon - Some Evidence from the ERM, ERM2 and Selected New EU Member States," CESifo Working Paper Series 1511, CESifo Group Munich.
- Jiri Jonas & Frederic S. Mishkin, 2003. "Inflation Targeting in Transition Countries: Experience and Prospects," NBER Working Papers 9667, National Bureau of Economic Research, Inc.
- Paul R. Krugman, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 669-682.
- Christopher J. Neely & Mark P. Taylor, 2007. "Exchange rate intervention," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 107-108.
- Lucjan Orlowski, 2003. "Monetary Convergence and Risk Premiums in the EU Accession Countries," Open Economies Review, Springer, vol. 14(3), pages 251-267, July.
- Barry Eichengreen, 2006.
"Can Emerging Markets Float? Should They Inflation Target?,"
in: Monetary Integration and Dollarization, chapter 8
Edward Elgar Publishing.
- Barry Eichengreen, 2002. "Can Emerging Markets Float? Should They Inflation Target?," Working Papers Series 36, Central Bank of Brazil, Research Department.
- Beetsma, Roel M W J & van der Ploeg, Frederick, 1994.
"Intramarginal Interventions, Bands and the Pattern of EMS Exchange Rate Distributions,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 583-602, August.
- Beetsma, R.M.W.J. & van der Ploeg, F., 1993. "Intramarginal interventions, bands and the pattern of EMS exchange rate distributions," Discussion Paper 1993-48, Tilburg University, Center for Economic Research.
- Lucjan T. Orlowski & Kirsten Lommatzsch, 2005. "Bond Yield Compression in the Countries Converging to the Euro," William Davidson Institute Working Papers Series wp799, William Davidson Institute at the University of Michigan.
- Paul de Grauwe & Gunther Schnabl, 2004. "Nominal versus Real Convergence with Respect to EMU Accession.How to Cope with the Balassa-Samuelson Dilemma," EUI-RSCAS Working Papers 20, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
- Bertola, Giuseppe & Caballero, Ricardo, 1990.
"Target Zones and Realignments,"
CEPR Discussion Papers
398, C.E.P.R. Discussion Papers.
- Bofinger, Peter & Wollmershauser, Timo, 2001.
"Is there a third way to EMU for the EU accession countries?,"
Elsevier, vol. 25(3), pages 253-274, September.
- Bofinger, Peter & Wollmershäuser, Timo, 2001. "Is there a third way to EMU for the EU accession countries?," Munich Reprints in Economics 20209, University of Munich, Department of Economics.
- John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
- BESSEC Marie, . "The Asymmetric Exchange Rate Dynamics in the EMS: a Time-Varying Threshold Test," EcoMod2003 330700015, EcoMod.
- Monika Blaszkiewicz & Przemek Kowalski & Lukasz Rawdanowicz & Przemyslaw Wozniak, 2004. "Harrod-Balassa-Samuelson Effect in Selected Countries of Central and Eastern Europe," CASE Network Reports 0057, CASE-Center for Social and Economic Research.
- Lucjan T. Orlowski, 2005. "Targeting Relative Inflation Forecast as Monetary Policy Framework for Adopting the Euro," William Davidson Institute Working Papers Series wp754, William Davidson Institute at the University of Michigan.
- Dibooglu, Sel & Kutan, Ali M., 2005. "Sources of inflation and output movements in Poland and Hungary: Policy implications for accession to the economic and monetary union," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 107-131, March.
- Tristani, Oreste, 1994. " Variable Probability of Realignment in a Target Zone," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(1), pages 1-14.
- Domac, Ilker & Mendoza, Alfonso, 2004. "Is there room for foreign exchange interventions under an inflation targeting framework ? Evidence from Mexico and Turkey," Policy Research Working Paper Series 3288, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:eee:ecosys:v:30:y:2006:i:4:p:346-365. 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: (Zhang, Lei)
If references are entirely missing, you can add them using this form.