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A Dynamic Approach to Inflation Targeting in Transition Economies

Author

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  • Lucjan T Orlowski

    (Sacred Heart University)

Abstract

This study views inflation targeting as a viable regime for more advanced transition economies. A dynamic approach to the trajectory of disinflation and the flexibility of direct inflation targeting is presented in the context of achieving monetary convergence to the EU/EMU. The candidate countries are advised to begin from strict inflation targeting and to follow with a more flexible inflation targeting regime before they establish a necessary 'foundational credibility' and monetary stability. These steps, ultimately followed by the euro-peg, are necessary in preparing for accession to the eurozone. The early experiences of the Czech Republic and Poland with inflation targeting are examined.

Suggested Citation

  • Lucjan T Orlowski, 2005. "A Dynamic Approach to Inflation Targeting in Transition Economies," Macroeconomics 0501038, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0501038
    Note: Type of Document - pdf; pages: 55
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    References listed on IDEAS

    as
    1. Orphanides, Athanasios & Wieland, Volker, 2000. "Efficient Monetary Policy Design near Price Stability," Journal of the Japanese and International Economies, Elsevier, vol. 14(4), pages 327-365, December.
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    6. Svensson, Lars E. O., 1999. "Monetary policy issues for the Eurosystem," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 51(1), pages 79-136, December.
    7. Mervyn A. King, 1996. "How should central banks reduce inflation? - Conceptual issues," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 25-52.
    8. von Hagen, Jurgen, 1999. "Money growth targeting by the Bundesbank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 681-701, June.
    9. Orphanides, Athanasios & Wilcox, David W, 2002. "The Opportunistic Approach to Disinflation," International Finance, Wiley Blackwell, vol. 5(1), pages 47-71, Spring.
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    11. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging-Market Countries," American Economic Review, American Economic Association, vol. 90(2), pages 105-109, May.
    12. King, Mervyn, 1997. "Changes in UK monetary policy: Rules and discretion in practice," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 81-97, June.
    13. Lars E. O. Svensson, 1999. "How should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 195-259.
    14. 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.
    15. Lucjan T Orlowski, 1998. "Exchange-rate policies in central Europe and monetary union," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 40(3), pages 58-78, September.
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    Cited by:

    1. Orlowski, Lucjan T., 2001. "Monetary convergence of the EU candidates to the Euro: A theoretical framework and policy implications," ZEI Working Papers B 25-2001, University of Bonn, ZEI - Center for European Integration Studies.
    2. Dalia Grigonyté, 2003. "Impact of Currency Boards on Fiscal Policy in Central and Eastern European Countries," Economic Change and Restructuring, Springer, vol. 36(2), pages 111-133, June.
    3. Orlowski, Lucjan T., 2001. "From inflation targeting to the euro-peg: A model of monetary convergence for transition economies," Economic Systems, Elsevier, vol. 25(3), pages 233-251, September.
    4. Orlowski, Lucjan T., 2005. "Monetary convergence of the EU accession countries to the eurozone: A theoretical framework and policy implications," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 203-225, January.
    5. Pelinescu, Elena & Caraiani, Petre, 2006. "Does the Inflation Targeting Have a Positive Role upon the Convergence of the Inflation Rate?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 3(3), pages 39-50, September.
    6. Kosta Josifidis & Emilija Beker Pucar & Slađana Srdić & Gabriela Ivan, 2014. "Inflation Targeting in Advanced vs. Emerging Economies before and after the Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(1), pages 79-106, Februar.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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