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Inflation Targeting, Full Employment and Long-run Economic Growth: The Case of Serbia

  • Gradimir Kozetinac


    (Belgrade Banking Academy)

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    In the preceding period, like nowadays, inflation targeting as a strategic frame for implementing monetary policy is subject to critics from the economists. Those critics refer primarily to an excessive focusing of the creators of monetary policy to “inflation only” targeting and neglecting considerations about production (i.e. employment). The central banks – inflation targeters demonstrate an increased aversion towards the fluctuations of inflation rate, and a lesser dislike regarding the fluctuations in the flows of production. From the theoretical perspective, even if the “strict” inflation target was adopted, the considerations regarding the movements of the total production in an economy are still important, due to the crucial role of production in determining future inflation. The central bank should possess a variable of production in its reaction function. The inflation target is in the center of monetary policy of the National bank of Serbia. The realization of the regime of inflation targeting in practice started in the last quarter of 2006. After four years of experience with the regime of inflation targeting, the evidence of its total effects (namely, from the aspect of inflation stabilization, and regarding stabilization of production and employment) is less encouraging, and far more providing a reason of discontent

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    This chapter was published in:
  • Stefan Bogdan Salej & Dejan Eric & Srdjan Redzepagic & Ivan Stosic (ed.), 2011. "Contemporary Issues in the Integration Processes of Western Balkan Countries in the European Union," Books, Institute of Economic Sciences, number conissue.
  • This item is provided by Institute of Economic Sciences in its series Book Chapters with number conissue-20.
    Handle: RePEc:ibg:chaptr:conissue-20
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    1. Gerald Epstein & Erinc Yeldan, 2008. "Inflation Targeting, Employment Creation and Economic Development: Assessing the Impacts and Policy Alternatives," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 129-130.
    2. Stephen G. Cecchetti & Michael Ehrmann, 2002. "Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 9, pages 247-274 Central Bank of Chile.
    3. M. H. Khalil Timamy, 2005. "Debate," Review of African Political Economy, Taylor & Francis Journals, vol. 32(104-105), pages 383-393, June.
    4. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
    5. André Minella & Paulo Springer de Freitas & Ilan Goldfajn & Marcelo Kfoury Muinhos, 2003. "Inflation Targeting in Brazil: Constructing Credibility Under Exchange Rate Volatility," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] b26, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    6. Joshua Aizenman & Michael Hutchison & Ilan Noy, 2008. "Inflation Targeting and Real Exchange Rates in Emerging Markets," NBER Working Papers 14561, National Bureau of Economic Research, Inc.
    7. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging-Market Countries," American Economic Review, American Economic Association, vol. 90(2), pages 105-109, May.
    8. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One decade of inflation targeting in the world : What do we know and what do we need to know?," Working Papers Central Bank of Chile 101, Central Bank of Chile.
    9. 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.
    10. Scott Roger & Mark R. Stone, 2005. "On Target? the International Experience with Achieving Inflation Targets," IMF Working Papers 05/163, International Monetary Fund.
    11. Robert Pollin & Andong Zhu, 2006. "Inflation and economic growth: a cross-country nonlinear analysis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(4), pages 593-614, July.
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