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The feasibility of adopting inflation targeting in Malawi: an empirical analysis

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  • Kisu Simwaka

    (Reserve Bank of Malawi, P.O. Box 30063, Lilongwe, Malawi)

Abstract

This study attempts to examine the minimum requirements for adopting an inflation targeting framework in Malawi. First, we examined four pre- requisites of an inflation targeting framework: a fairy long track record of low and stable inflation; a degree of independence; having a sole target; and the existence of a predictable and stable relationships between monetary policy and inflation outcomes. The findings indicate that while the requirement of having a sole target has been satisfied, there are still problems associated with the Reserve Bank of Malawi’s independence and the existence of stable and predictable relationship between monetary policy instruments and inflation in Malawi. Therefore, Malawi is yet to reach a stage where a fully-fledged inflation targeting framework could be incorporated into its overall strategy. Keywords: Inflation targeting; central bank independence; vector autoregression Authors’ E-Mail Address: ksimwaka@rbm.malawi.net

Suggested Citation

  • Kisu Simwaka, 2004. "The feasibility of adopting inflation targeting in Malawi: an empirical analysis," Macroeconomics 0407015, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0407015
    Note: Type of Document - txt; pages: 50
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    References listed on IDEAS

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    1. Miguel A Savastano & Paul R Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
    2. Laura Papi & G. C. Lim, 1997. "An Econometric Analysis of the Determinants of Inflation in Turkey," IMF Working Papers 97/170, International Monetary Fund.
    3. Ferya Kadioglu & Nilufer Ozdemir & Gokhan Yilmaz, 2000. "Inflation Targeting in Developing Countries," Discussion Papers 0006, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    4. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110.
    5. G. C. Lim & Guy Debelle, 1998. "Preliminary Considerations of an Inflation Targeting Framework for the Philippines," IMF Working Papers 98/39, International Monetary Fund.
    6. Richard T. Freeman & Jonathan L. Willis, 1995. "Targeting inflation in the 1990s: recent challenges," International Finance Discussion Papers 525, Board of Governors of the Federal Reserve System (U.S.).
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    More about this item

    Keywords

    Inflation targeting; central bank independence; vector autoregression;

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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