Investigate how Central Banks' Pursuit of Strict Inflation Targeting Impacts Economic Growth and Employment in Different Countries
The impact of inflation targeting on macroeconomic performance and policy design
Keywords:
inflation targeting, macroeconomic performance, monetary policy design, emerging economies, economic instability, cost shocks, demand shocks, financial crises, monetary policy goals, Gold StandardAbstract
Inflation targeting has been extensively embraced in both advanced and developing nations. This article examines the evidence on the impact of inflation targeting on macroeconomic performance and evaluates the implications of this data for inflation targeting and monetary policy design. Although there have been similarities in macroeconomic experiences between inflation targeting and non-targeting established nations, it is evident that inflation targeting has enhanced macroeconomic performance in emerging economies. Crucially, the practice of inflation targeting has not been linked to increased actual economic instability in either advanced or emerging economies. Cost shocks, such as the significant increase in commodity prices, need central banks to make challenging immediate decisions. However, a commitment to a specific aim might improve the capacity to handle demand shocks and financial crises. This study analyzes the progression of monetary policy goals and how, after a deviation, it has reverted back to focusing on controlling inflation, similar to the approach during the Gold Standard (GS) era.References
Lim, Joseph (2008) “A Review of Philippine Monetary Policy Towards An Alternative Monetary Policy” International Review of Applied Economics, forthcoming.
Epstein, Gerald, (2008) “Employment Targeting Central Bank Policy in South Africa.” International Review of Applied Economics, forthcoming.
Packard, Tu Anh (2005) “Monetary Policy in Vietnam: Alternatives to Inflation Targeting” Presented at the Alternatives to Inflation Targeting Monetary Policy for Stable and Egalitarian Growth in Developing Countries conference, Centro de Estudios de Estado Y Sociedad (CEDES), Buenos Aires, May 13-14, 2005.
Frenkel, Roberto and Martin Rapetti (2008) “Five Years of Competitive and Stable Real Exchange Rate in Argentina, 2002-2007” International Review of Applied Economics, forthcoming.
Telli, Cagatay, Ebru Voyvoda, and Erinc Yeldan (2008) “Macroeconomics of Twin-Targeting in Turkey: Analytics of a Financial CGE Model” International Review of Applied Economics, forthcoming.
Galindo, L.M. and Ros J. (2008) “Alternatives to Inflation Targeting in Mexico” International Review of Applied Economics, forthcoming.
Pollin, Robert N., Gerald Epstein, James Heintz and Leonce Ndikumana (2006) An Employment-Targeted Economic Program for South Africa; A Study Sponsored by the United Nations Development Program (UNDP), UNDP and the Political Economy Research Institute (PERI). Northampton: E. Elgar Publishers.
Kapsos, Steven (2004) "Estimating growth requirements for reducing working poverty: can the world halve working poverty by 2015?" Employment Strategy Papers, No. 2004/14, Employment Strategy Department, Geneva: ILO.
Ho, Corrinne and Robert N. McCauley (2003) "Living with Flexible Exchange Rates: Issues and Recent Experience in Inflation Targeting Emerging Market Economies". Bank for International Settlements (BIS), Working Paper No. 130.
Frenkel, Roberto (2006) "An Alternative to Inflation Targeting in Latin America: Macroeconomic Policies Focused on Inflation", Journal of Post Keynesian Economics. Summer. Vol. 28, No. 4., pp. 574-591.
This work is licensed under a 