Under What Conditions Can Inflation Targeting Be Adopted? The Experience of Emerging Markets
While there have been numerous studies of inflation targeting in industrial countries, there has been much less analysis of the effects of inflation targeting in emerging market countries. Based on a new and detailed survey of 31 central banks, this paper shows that inflation targeting in emerging-market countries brings significant benefits to the countries that adopt it relative to other strategies, such as money or exchange rate targeting. Indeed, by comparing the performance of the inflation-targeting countries with a sample of countries that pursue other regimes we show that there are significant improvements in anchoring both inflation and inflation expectations with no adverse effects on output. In addition, under inflation targeting interest rates, exchange rates, and international reserves are less volatile, and the risk of currency crises relative to money or exchange rate targets is smaller. Interestingly, IT seems to outperform exchange rate pegs—even when only successful pegs are chosen in comparison. The survey evidence indicates that it is unnecessary for countries to meet a stringent set of institutional, technical, and economic “preconditions” for the successful adoption of inflation targeting.
|Date of creation:||Dec 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Casilla No967, Santiago|
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/
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.:
- Mishkin, Frederic S., 1998.
"International Experiences With Different Monetary Policy Regimes,"
648, Stockholm University, Institute for International Economic Studies.
- Mishkin, F.S., 1998. "International Experiences with Different Monetary Policy Regimes," Papers 648, Stockholm - International Economic Studies.
- Frederic S. Mishkin, 2000. "International Experiences with Different Monetary Policy Regimes," NBER Working Papers 7044, National Bureau of Economic Research, Inc.
- Frederic S. Mishkin, 1999. "International Experiences with Different Monetary Policy Regimes," NBER Working Papers 6965, National Bureau of Economic Research, Inc.
- Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003.
"Addicted to Dollars,"
NBER Working Papers
10015, National Bureau of Economic Research, Inc.
- Nicoletta Batini & Paul Levine & Joseph Pearlman, 2003.
"Indeterminacy with inflation-forecast-cased rules in a two-bloc model,"
Board of Governors of the Federal Reserve System (U.S.).
- Nicoletta Batini & Paul Levine & Joseph Pearlman, 2004. "Indeterminacy with inflation-forecast-based rules in a two-bloc model," International Finance Discussion Papers 797, Board of Governors of the Federal Reserve System (U.S.).
- Batini, Nicoletta & Levine, Paul & Pearlman, Joseph G., 2004. "Indeterminacy with inflation-forecast-based rules in a two-bloc model," Working Paper Series 0340, European Central Bank.
- Nicoletta Batini & Paul Levine & Joseph Pearlman, 2004. "Indeterminacy with Inflation-Forecast-Based Rules in a Two-Bloc Model," School of Economics Discussion Papers 0204, School of Economics, University of Surrey.
- Jaime Ruiz-Tagle, 2006. "Financial Markets Incompleteness and Inequality Over the Life-Cycle," Working Papers Central Bank of Chile 405, Central Bank of Chile.
- Meyer, Laurence H., 2002. "Inflation targets and inflation targeting," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 147-162, August.
- Anne-Marie Brook & Özer Karagedikli & Dean Scrimgeour, 2002. "An optimal inflation target for New Zealand: lessons from the literature," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, September.
- Rich, Georg, 2000. "Monetary Policy without Central Bank Money: A Swiss Perspective," International Finance, Wiley Blackwell, vol. 3(3), pages 439-69, November.
- 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.
- 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?," NBER Working Papers 8397, National Bureau of Economic Research, Inc.
- Nicoletta Batini & Anthony Yates, 2001.
"Hybrid inflation and price level targeting,"
Bank of England working papers
135, Bank of England.
- H. Genberg, 2001. "Asset Prices, Monetary Policy and Macroeconomic Stability," DNB Staff Reports (discontinued) 64, Netherlands Central Bank.
- Baltensperger, Ernst & Fischer, Andreas M. & Jordan, Thomas J., 2007.
"Strong goal independence and inflation targets,"
European Journal of Political Economy,
Elsevier, vol. 23(1), pages 88-105, March.
- Scott Roger & Mark R. Stone, 2005. "On Target? the International Experience with Achieving Inflation Targets," IMF Working Papers 05/163, International Monetary Fund.
- Lars E O Svensson, 1997. "Inflation targeting in an open economy: strict or flexible inflation targeting?," Reserve Bank of New Zealand Discussion Paper Series G97/8, Reserve Bank of New Zealand.
- Mark Zelmer & Andrea Schaechter & Mark R. Stone & Alina Carare, 2002. "Establishing Initial Conditions in Support of Inflation Targeting," IMF Working Papers 02/102, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:406. 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: (Claudio Sepulveda)
If references are entirely missing, you can add them using this form.