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A Dynamic Approach to Inflation Targeting in Transition Economies

  • Lucjan T Orlowski

    (Sacred Heart University)

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.

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Paper provided by EconWPA in its series Macroeconomics with number 0501038.

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Length: 55 pages
Date of creation: 31 Jan 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0501038
Note: Type of Document - pdf; pages: 55
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  1. Paul R. Masson, 1999. "Monetary and Exchange Rate Policy of Transition Economies of Central and Eastern Europe after the Launch of EMU," IMF Policy Discussion Papers 99/5, International Monetary Fund.
  2. Svensson, Lars E O, 2000. "The First Year Of The Eurosystem: Inflation Targeting Or Not?," CEPR Discussion Papers 2380, C.E.P.R. Discussion Papers.
  3. Lionel Halpern & Charles Wyplosz, 1996. "Equilibrium Exchange Rates in Transition Economies," IMF Working Papers 96/125, International Monetary Fund.
  4. Frederic S. Mishkin & Adam S. Posen, 1998. "Inflation Targeting: Lessons from Four Countries," NBER Working Papers 6126, National Bureau of Economic Research, Inc.
  5. Peter F. Christoffersen & Robert F. Westcott, 1999. "Is Poland Ready for Inflation Targeting?," IMF Working Papers 99/41, International Monetary Fund.
  6. Svensson, Lars E. O., 1998. "Inflation targeting as a monetary policy rule," CFS Working Paper Series 1998/16, Center for Financial Studies (CFS).
  7. Svensson, Lars, 1999. "How Should Monetary Policy Be Conducted in an Era of Price Stability," Seminar Papers 680, Stockholm University, Institute for International Economic Studies.
  8. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging Market Countries," NBER Working Papers 7618, National Bureau of Economic Research, Inc.
  9. Mervyn King, 1996. "How should central banks reduce inflation? conceptual issues," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 53-91.
  10. Svensson, L.E.O., 1999. "Monetary Policy Issues for the Eurosystem," Papers 667, Stockholm - International Economic Studies.
  11. Mervyn King, 1999. "Challenges for monetary policy : new and old," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 11-57.
  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. Mervyn King, 1996. "How should central banks reduce inflation? - Conceptual issues," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 25-52.
  14. Athanasios Orphanides & David W. Wilcox, 1996. "The opportunistic approach to disinflation," Finance and Economics Discussion Series 96-24, Board of Governors of the Federal Reserve System (U.S.).
  15. Lucjan T Orlowski, 1998. "Exchange-rate policies in central Europe and monetary union," Comparative Economic Studies, Palgrave Macmillan, vol. 40(3), pages 58-78, September.
  16. 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.
  17. von Hagen, Jurgen, 1999. "Money growth targeting by the Bundesbank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 681-701, June.
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