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Monetary Policy under Flexible Exchange Rates : An Introduction to Inflation Targeting

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dc.contributor.authorAgenor, Pierre-Richard
dc.date.accessioned2014-09-04T21:30:59Z
dc.date.available2014-09-04T21:30:59Z
dc.date.issued2000-12
dc.description.abstractIn the past few years, a number of central banks have adopted inflation targeting for monetary policy. The author provides an introduction to inflation targeting, with an emphasis on analytical issues, and the recent experience of middle- and high-income developing countries (which have relatively low inflation to begin with, and reasonably well-functioning financial markets). After presenting a formal analytical framework, the author discusses the basic requirements for inflation targeting, and how such a regime differs from money, and exchange rate targeting regimes. After discussing the operational framework for inflation targeting (including the price index to monitor the time horizon, the forecasting procedures, and the role of asset prices), he examines recent experiences with inflation targets, providing new evidence on the convexity of the Phillips curve for six developing countries. His conclusions: Inflation targeting is a flexible policy framework that allows a country's central bank to exercise some degree of discretion, without putting in jeopardy its main objective of maintaining stable prices. In middle- and high-income developing economies that can refrain from implicit exchange rate targeting, it can improve the design, and performance of monetary policy, compared with other policy approaches that central banks may follow. Not all countries may be able to satisfy the technical requirements (such as adequate price data, adequate understanding of the links between instruments, and targets of monetary policy, and adequate forecasting capabilities), but such requirements should not be overstated. Forecasting capability can never be perfect, and sensible projections always involve qualitative judgment. More important, and often more difficult, is the task of designing, or improving an institutional framework that would allow the central bank to pursue the goal of low, stable inflation, while maintaining the ability to stabilize fluctuations in output.en
dc.identifier.doi10.1596/1813-9450-2511
dc.identifier.urihttps://hdl.handle.net/10986/19967
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 2511
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectactual inflation
dc.subjectaggregate demand
dc.subjectaggregate supply
dc.subjectaggregate supply curve
dc.subjectautoregression
dc.subjectbank lending
dc.subjectcapital flight
dc.subjectcapital markets
dc.subjectcentral bank
dc.subjectCentral Bank Independence
dc.subjectcentral banks
dc.subjectclosed economy
dc.subjectcompetitiveness
dc.subjectConceptual Framework
dc.subjectconsumers
dc.subjectdebt
dc.subjectdemand for money
dc.subjectdestabilizing effect
dc.subjectdeveloping economies
dc.subjectdiscount rate
dc.subjectdisinflation
dc.subjectEconomic Policy
dc.subjecteconomists
dc.subjectelasticity
dc.subjectequilibrium
dc.subjectexchange rate
dc.subjectexchange rate crises
dc.subjectexchange rates
dc.subjectfinancial markets
dc.subjectfinancial structure
dc.subjectfinancial system
dc.subjectfloating exchange rates
dc.subjectforecasting inflation
dc.subjectforecasts
dc.subjectforeign shocks
dc.subjectgeneral level of prices
dc.subjectgovernment spending
dc.subjectincome
dc.subjectincome developing countries
dc.subjectincrease in inflation
dc.subjectindirect instruments
dc.subjectIndustrial Countries
dc.subjectinflation
dc.subjectinflation forecasts
dc.subjectinflation rate
dc.subjectinflation rates
dc.subjectinflation target
dc.subjectinflation targeting
dc.subjectinflation targeting framework
dc.subjectinflation targeting regime
dc.subjectinflation targets
dc.subjectinflationary pressures
dc.subjectinstitutional framework
dc.subjectInterest Rates
dc.subjectintermediate goods
dc.subjectintermediate inputs
dc.subjectlending rates
dc.subjectlong term
dc.subjectlow inflation
dc.subjectmacroeconomic models
dc.subjectmetals
dc.subjectmonetary aggregate
dc.subjectMonetary policy
dc.subjectMonetary targeting
dc.subjectmoney demand
dc.subjectmoney growth
dc.subjectmoney supply
dc.subjectnominal anchor
dc.subjectnominal exchange rate
dc.subjectnominal interest rate
dc.subjectopen economies
dc.subjectoptimization
dc.subjectPhillips curve
dc.subjectpolicy decisions
dc.subjectpolicy instruments
dc.subjectPOLICY RESEARCH
dc.subjectPolicy Trade-offs
dc.subjectpotential output
dc.subjectPoverty Reduction
dc.subjectprice changes
dc.subjectprice inflation
dc.subjectprice level
dc.subjectprice setting
dc.subjectprice stability
dc.subjectprivate agents
dc.subjectprivate consumption
dc.subjectpublic debt
dc.subjectrate of inflation
dc.subjectrate targeting
dc.subjectreal exchange
dc.subjectreal exchange rate
dc.subjectreal interest
dc.subjectreal interest rate
dc.subjectreduction in inflation
dc.subjectrelative price
dc.subjectrisk premia
dc.subjectsavings
dc.subjectshort-term interest rates
dc.subjectstable inflation
dc.subjectstable rate
dc.subjectstandard deviation
dc.subjecttradable goods
dc.subjecttransmission mechanism
dc.subjecttransmission process
dc.subjectunemployment
dc.subjectvariable inflation
dc.subjectwages
dc.subjectwealth
dc.titleMonetary Policy under Flexible Exchange Rates : An Introduction to Inflation Targetingen
dspace.entity.typePublication
okr.crossref.titleMonetary Policy under Flexible Exchange Rates: An Introduction to Inflation Targeting
okr.date.disclosure2001-02-17
okr.date.doiregistration2025-04-10T09:18:57.243813Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeEnvironment and Natural Resources
okr.guid338491468774932954
okr.identifier.doi10.1596/1813-9450-2511
okr.identifier.reportWPS2511
okr.language.supporteden
okr.sectorEconomic management :: Macroeconomic management
okr.topicEnvironment::Environmental Economics & Policies
okr.topicMacroeconomics and Economic Growth::Economic Theory & Research
okr.topicMacroeconomics and Economic Growth::Fiscal & Monetary Policy
okr.topicMacroeconomics and Economic Growth::Inflation
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.unitEconomic Policy and Poverty Reduction Division, World Bank Institute
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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