Search results

The purpose of this paper is to establish a link between inflation uncertainty and interest rates for five inflation‐targeting countries.

The approach takes the form of a time‐varying parameter model with a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) specification, used to derive impulse uncertainty and structural uncertainty.

This study attempts to establish a link between inflation uncertainty and interest rates for five inflation‐targeting countries, i.e. Canada, Finland, Spain, Sweden, and the UK. Decomposing inflation uncertainty into two components – impulse and structural, a positive association was found between the expected inflation and interest rates. Structural uncertainty has a positive and significant effect on interest rates for some countries. It has also been found that the long‐run effects of inflation on interest rates are less than unity for the post‐inflation targeting period, which implies that in some respect the Central Bank has been successful in targeting inflation. This has allowed the Central Bank to employ a less restrictive monetary policy in an environment of a credible inflation‐targeting strategy.

Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) can be used instead of GARCH modelling.

This is the first study that has tried to establish the link between different types of inflation uncertainty and interest rates for the inflation‐targeting countries to see the effect of inflation targeting.

The purpose of this study is twofold. First, to estimate an optimal inflation rate for Ghana and second, to investigate factors that account for the differences between observed and target inflation.

The paper explored the questions within two econometric frameworks, the Autoregressive Distributed Lag (ARDL) and Threshold Regression Models using data spanning the period 1965–2019.

The study estimated a range of 5–7% optimal inflation for Ghana. While this confirms the single-digit inflation targeting by the Bank of Ghana, the range is lower than the central bank's band of 6–10%. The combined behaviours of the central bank, banks and external outlook influence inflation target misses.

The study urges the central bank to continue pursuing its single-digit inflation targeting. However, it implies that there is still room for the Bank to further lower the current inflation band to achieve an optimal outcome on growth and welfare. Again, the Bank should commit to increased transparency and accountability to enhance its credibility in attaining the targeted inflation.

The study is one of the first attempts in Africa in Ghana to estimate an optimal inflation target and investigate the underlying factors for deviation from the targets.

Inflation targeting has increasingly become a popular monetary framework since its first introduction in New Zealand at the beginning of 1990. However, the causality effects of this policy on economic performance, particularly in periods of economic turmoil remain controversial. Thus, this paper re-examines the treatment effect of inflation targeting on two important macro indicators which are inflation rate and output growth with the focus on emerging market economies. The global financial crisis, which is known as the great recession since the last decade, is investigated as an exogenous shock to test for the effectiveness of this popular regime.

The difference-in-difference approach in the fixed-model is employed for this investigation using a balanced panel data of 54 countries with 15 inflation-targeting countries for the period 2002 to 2010.

The examination finds that there is no significant difference in terms of the inflation rate and gross domestic product growth over the whole research period between the treatment and control groups. However, the outcome suggests that emerging economies can control the increase in inflation rate when the economy has to cope with the exogenous uncertainties.

This finding indicates important policy implications for central banks in many countries.

Inflation targeting can help emerging countries to reduce an increase in inflation rate in the crisis period without many trade-offs in the growth of output.

The purpose of this paper is to examine the impact of inflation targeting on inflation for 27 countries that have adopted an inflation‐targeting regime.

The paper uses intervention analysis in Harvey's structural time series model to analyse the impact of inflation targeting on inflation, using quarterly observations. This approach provides the most useful framework for separating changes that occur to a series ordinarily over time from those happening due to exogenous events identified a priori, such as inflation targeting.

The empirical evidence suggests that almost all of the central banks that have pursued this strategy have been unsuccessful at controlling inflation, with the results indicating that the adoption of an inflation‐targeting regime has had the perverse effect on inflation for almost every country.

The implication of the finding is that central banks which have adopted an inflation‐targeting regime do not appear to have been particularly successful in reducing inflation in any significant way, as is regularly claimed in the extant literature.

The paper provides further evidence against the adoption of an inflation‐targeting regime using an unconventional approach for 27 countries that are regarded as “fully‐fledged” inflation‐targeting countries.

The purpose of this paper is to investigate the optimal inflation targets for an appropriate exchange rate policy in 15 major oil exporting countries in Sub-Saharan African (SSA).

Dynamic heterogeneous panel threshold techniques are used via threshold-effect test and threshold regression. This procedure is achieved through a grid search and bootstrapping replications method to stimulate the asymptotic distribution of the likelihood ratio test of the null hypothesis on no-threshold as against the alternative hypothesis. The p-values validate the threshold estimates.

Findings revealed that the optimal inflation target has a turning point and its impact on the real exchange rate is up to a threshold level of 14.47 per cent. Furthermore, the inflation rate above the threshold level overwhelmingly revealed its effect on real exchange regimes.

It would have been a good idea to investigate optimal inflation targets for all African countries but due to inadequate data the selection criteria was narrowed to oil-exporting countries in Sub-Saharan Africa.

Inflation targeting beyond the threshold level would have serious implications on the monetary policy.

To the best of the knowledge, this is the first study to look at optimal inflation targets for 15 major oil exporting countries in general and SSA countries in particular. The findings provide a critical analysis of an inflation regime for a typical oil-producing country that oil exports being their source of revenue.

The purpose of this paper is to explore whether India is a suitable candidate for an inflation targeting regime. It begins by placing India's monetary policy actions in a broader context by discussing whether the Reserve Bank of India (RBI) should shift from its current policy of heavily managed exchange rates to one involving greater currency flexibility. If the latter is chosen, the selection of inflation targeting would appear an appropriate one.

This paper has analytical, empirical and policy dimensions. Given the recent history of exchange rate centered policy in India, a discussion of the role of the exchange rate is needed. This is presented by the use of an analytical model where we examine how inflation targeting might work with the exchange rate. Then the decision rule from the model (a monetary policy rule (MPR)) is adapted for empirical testing and is estimated to investigate whether an MPR that follows inflation targeting can work for India.

There is some evidence to suggest that the RBI follows an MPR quite inadvertently. The MPR (interest rates) tends to react to current inflation, but there is no evidence that it reacts to forecasts of inflation. Additionally, interest rates do not react at all to the exchange rate.

The RBI's operating policy framework and whether it should adopt an inflation targeting arrangement is a highly topical issue that has attracted a great deal of attention in policy discussions in India. Very few papers broach this topic systematically and combine the analytical and empirical considerations.

The purpose of this paper is to deal with the dynamics of a Neo‐Keynesian model applied to a small open economy, in order to show the impact of commercial openness on the choice of the optimal inflation target.

The author uses a neo‐Keynesian model with calibration for Chile.

The results show that there is a relation between the degree of openness and the type of inflation targeting policy.

The originality of the paper is to use a neo‐Keynesian model to deal with a small open economy, which uses inflation targeting as a monetary rule.

This article aims to analyze if the adoption of inflation targeting in Brazil contributed to an improvement in the conduction of monetary policy capable of increasing credibility and reducing inflation without an increase in the sacrifice rate.

Considering the Brazilian experience, this article estimates, through GMM and VAR methods, the offsetting effects of a monetary policy change on the output‐inflation and unemployment‐inflation trade‐offs.

The findings denote that the disinflationary process implemented in Brazil, after the adoption of inflation targeting, is not associated with the emergence of the above‐mentioned trade‐offs. Furthermore, the development of credibility in the conduction of monetary policy is an important element responsible for the achievement of this result.

Development of credibility is an important strategy for improving the conduction of the monetary policy.

The results of the paper give some new insights about the conduction of monetary policy for developing countries, which have adopted inflation targeting.

The purpose of this paper is to analyze the influence of macroeconomic variables and economic policies on expectations and confidence of entrepreneurs. It provides an econometric analysis of the expectation transmission channel under inflation targeting in Brazil, emphasizing the effect of inflation targeting credibility on the business confidence of industrial entrepreneurs.

Based on ordinary least square (OLS), generalized method of moments (GMM) and vector autoregression (VAR), the paper provides empirical evidence about the influence of inflation targeting credibility and macroeconomic policies on expectations and confidence of entrepreneurs and, as a consequence, on industrial production.

The evidence for the Brazilian economy suggest that monetary and fiscal policies as well as the credibility of the monetary regime affect economic activity by their impact on expectations of entrepreneurs.

Development of macroeconomic stability is important to the expectations formed by entrepreneurs and, therefore, for industrial production. In particular, inflation targeting credibility stimulates industrial production, since it increases the confidence of entrepreneurs about the functioning of the economy and their businesses.

The results suggest new insights about the influence of economic policies on the real side of the economy, pointing out that the conduct of economic policies in emerging countries with inflation targets are likely to affect the expectations of entrepreneurs and therefore their production decisions.

The Ghanaian economy has experienced relative stability, improved macroeconomic performance and resilience over the past few years, following the introduction of a new monetary policy framework called inflation targeting (IT). The purpose of this paper is to look at IT and its effect on inflation management in Ghana.

The study employed monthly time series data from 1980 to 2009.

The results gathered in this study demonstrate that IT has had a significant impact on the reduction of inflation series in recent years and has reduced the persistence of inflation series considerably. It is largely amplified that the implementation of an IT framework in Ghana has been a success and has contributed to a change in the conduct of monetary policy towards best practice.

The study could have used a lot more macroeconomic variables.

The paper's findings are very important for Central Banks that are using the IT framework, or planning to do so, for efficiency and effectiveness.

The paper is the first of its kind for developing countries, especially in Africa and Ghana for that matter.