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The Journey to Inflation Targeting: Easier Said than Done The Case for Transitional Arrangements along the Road

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  • Mr. Bernard J Laurens
  • Mr. Kelly Eckhold
  • Mr. Darryl King
  • Mr. Nils O Maehle
  • Abdul Naseer
  • Alain Durré

Abstract

Countries with evolving monetary regimes that decide to embark on “the Journey to inflation targeting” may not be able to adopt a full-fledged inflation targeting regime immediately. Those countries would be better off adopting transitional arrangements that take advantage of the informational content of monetary aggregates, developing an economic analysis capacity, and concentrating on monetay operations aimed at steering money market interest rates. This approach would allow the central bank to buy time for developing the building blocks for effective monetary policy, support transparent central bank communication, and limit the potential for undesirable outcomes along the road.

Suggested Citation

  • Mr. Bernard J Laurens & Mr. Kelly Eckhold & Mr. Darryl King & Mr. Nils O Maehle & Abdul Naseer & Alain Durré, 2015. "The Journey to Inflation Targeting: Easier Said than Done The Case for Transitional Arrangements along the Road," IMF Working Papers 2015/136, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2015/136
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    2. Kady Keita & Camelia Turcu, 2019. "How to limit fiscal procyclicality: the role of exchange rate regimes, fiscal rules and institutions," Working Papers 2019.01, International Network for Economic Research - INFER.
    3. El-Shagi, Makram & Tochkov, Kiril, 2022. "Divisia monetary aggregates for Russia: Money demand, GDP nowcasting and the price puzzle," Economic Systems, Elsevier, vol. 46(4).
    4. Zhandos Ybrayev, 2017. "The Prospect Of Inflation Targeting In Kazakhstan," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 5(1), pages 33-48.
    5. Pami Dua, 2023. "Monetary Policy Framework in India," Springer Books, in: Pami Dua (ed.), Macroeconometric Methods, chapter 0, pages 39-72, Springer.
    6. Faisal Rachman, 2016. "Is Inflation Target Announced by Bank Indonesia the Most Accurate Inflation Forecast?," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 62, pages 98-120, August.
    7. René Cabral & Francisco G. Carneiro & André Varella Mollick, 2020. "Inflation targeting and exchange rate volatility in emerging markets," Empirical Economics, Springer, vol. 58(2), pages 605-626, February.
    8. Mr. Romain M Veyrune & Shaoyu Guo, 2019. "Autonomous Factor Forecast Quality: The Case of the Eurosystem," IMF Working Papers 2019/296, International Monetary Fund.
    9. International Monetary Fund, 2016. "Asean-5 Cluster Report: Evolution of Monetary Policy Frameworks," IMF Staff Country Reports 2016/176, International Monetary Fund.
    10. Mr. Nils O Maehle, 2020. "Monetary Policy Implementation: Operational Issues for Countries with Evolving Monetary Policy Frameworks," IMF Working Papers 2020/026, International Monetary Fund.
    11. Helena Glebocki Keefe & Hedieh Shadmani, 2020. "Examining the asymmetric monetary policy response to foreign exchange market conditions in emerging and developing economies," International Economics and Economic Policy, Springer, vol. 17(2), pages 503-530, May.

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