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Inflation Targeting in the Context of IMF-Supported Adjustment Programs

Author

Listed:
  • Gerd Schwartz
  • Pau Rabanal
  • Mario I. Bléjer
  • Alfredo Mario Leone

Abstract

This paper argues that the IMF's traditional monetary conditionality-a ceiling on net domestic assets of the central bank and a floor on its net international reserves-should be adapted in IMF-supported adjustment programs with countries which have a framework of explicit inflation targets for the implementation of monetary policy. This adaptation should aim at enhancing correspondence and consistency between the monetary objectives of the central bank and the targets established under the IMF-supported adjustment program, as well as between the different instruments used to achieve the policy objectives and targets. The paper reviews various general options in this regard, and, using the case of Brazil as an example, demonstrates how these options may be implemented in practice.

Suggested Citation

  • Gerd Schwartz & Pau Rabanal & Mario I. Bléjer & Alfredo Mario Leone, 2001. "Inflation Targeting in the Context of IMF-Supported Adjustment Programs," IMF Working Papers 01/31, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:01/31
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    Citations

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    Cited by:

    1. Victor, Olivo, 2007. "El Régimen de Metas de Inflación en Brasil: Breve Descripción y Evaluación de su Desempeño
      [Brazil's Inflation Targeting Regime: Brief Description and Evaluation of its Performance]
      ," MPRA Paper 41405, University Library of Munich, Germany.
    2. Warburton, C.E.S., 2014. "Macroeconometric Stabilization And Imf Policies: A Surveillance Of Inflation," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 23(4), pages 7-22.
    3. Eric Parrado & Andrés Velasco, 2002. "Alternative Monetary Rules in the Open Economy: A Welfare-Based Approach," Central Banking, Analysis, and Economic Policies Book Series,in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 7, pages 295-348 Central Bank of Chile.
    4. James Heintz & Gerald Epstein, 2006. "Monetary Policy and Financial Sector Reform For Employment Creation and Poverty Reduction in Ghana," Working Papers wp113, Political Economy Research Institute, University of Massachusetts at Amherst.
    5. Carlos José García & Jorge Enrique Restrepo, 2001. "Price Inflation and Exchange Rate Pass-Through in Chile," Working Papers Central Bank of Chile 128, Central Bank of Chile.
    6. Dumitriu, Ramona & Stefanescu, Razvan, 2014. "Perspective ale ţintirii inflaţiei
      [Perspectives of the Inflation Targeting]
      ," MPRA Paper 52943, University Library of Munich, Germany, revised 14 Jan 2014.
    7. Arminio Fraga & Ilan Goldfajn & André Minella, 2004. "Inflation Targeting in Emerging Market Economies," NBER Chapters,in: NBER Macroeconomics Annual 2003, Volume 18, pages 365-416 National Bureau of Economic Research, Inc.
    8. repec:ilo:ilowps:455446 is not listed on IDEAS
    9. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "A Practical Model-Based Approach to Monetary Policy Analysis—Overview," IMF Working Papers 06/80, International Monetary Fund.
    10. William R. Cline, 2003. "Restoring economic growth in Argentina," Policy Research Working Paper Series 3158, The World Bank.
    11. Norman Loayza & Raimundo Soto, 2001. "Ten Years of Inflation Targeting: Design, Performance, Challenges," Working Papers Central Bank of Chile 131, Central Bank of Chile.
    12. Toprak, Metin, 2001. "Yükselen Piyasalarda Finansal Kriz
      [Financial Crises in Emerging Markets]
      ," MPRA Paper 9092, University Library of Munich, Germany, revised 2001.
    13. Gerald Epstein, 2009. "Rethinking Monetary and Financial Policy: Practical suggestions for monitoring financial stability while generating employment and poverty reduction," Published Studies ilo_epstein11_09, Political Economy Research Institute, University of Massachusetts at Amherst.
    14. Brigitte Granville & Sushanta Mallick*, 2006. "Integrating poverty reduction in IMF-World Bank Models," Working Papers id:502, eSocialSciences.
    15. Easterly, William, 2006. "An identity crisis? Examining IMF financial programming," World Development, Elsevier, vol. 34(6), pages 964-980, June.
    16. James M. Boughton, 2004. "The IMF and the force of History; Ten Events and Ten Ideas that Have Shaped the Institution," IMF Working Papers 04/75, International Monetary Fund.
    17. Tony Cavoli & Ramkishen S. Rajan, 2006. "Inflation Targeting Arrangements in Asia: Exploring the Role of the Exchange Rate," SCAPE Policy Research Working Paper Series 0603, National University of Singapore, Department of Economics, SCAPE.
    18. Ilan Goldfajn & Poonam Gupta, 2002. "Overshootings and Reversals: The Role of Monetary Policy," Central Banking, Analysis, and Economic Policies Book Series,in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 9, pages 279-302 Central Bank of Chile.
    19. Gerald Epstein & James Heintz & Léonce Ndikumana & Grace Chang, 2011. "Employment, Poverty and Economic Development in Madagascar," Published Studies ndikumana_ilo2010, Political Economy Research Institute, University of Massachusetts at Amherst.
    20. John Hawkins, 2005. "Globalisation and monetary operations in emerging economies," BIS Papers chapters,in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 59-80 Bank for International Settlements.
    21. Gerald Epstein & James Heintz, 2006. "Monetary Policy and Financial Sector Reform for Employment Creation and Poverty Reduction in Ghana," Country Study 2, International Policy Centre for Inclusive Growth.
    22. repec:ilo:ilowps:434439 is not listed on IDEAS

    More about this item

    Keywords

    Conditionality; Brazil; Monetary policy; Inflation targeting; Fund-supported adjustment programs; Monetary Policy Rules; inflation; inflation target; central bank; General Aggregative Models: Forecasting and Simulation;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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