scholarly journals Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting versus Flexible Currency Board in Ghana, South Africa and the WAEMU

2013 ◽  
Author(s):  
Fadia Al Hajj ◽  
Gilles Dufrrnot ◽  
Kimiko Sugimoto ◽  
Romain Wolf
Keyword(s):  
South Africa ◽  
Monetary Policy ◽  
Inflation Targeting ◽  
Currency Board ◽  
Policy Regimes

SWITCHING TO GOOD POLICY? THE CASE OF CENTRAL AND EASTERN EUROPEAN INFLATION TARGETERS

2019 ◽  
Vol 24 (8) ◽  
pp. 2104-2128
Author(s):  
Andrej Drygalla
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Inflation Targeting ◽  
Dynamics Simulation ◽  
Output Volatility ◽  
The Czech Republic ◽  
Policy Regimes ◽  
Switching Dynamic ◽  
Dynamic Stochastic ◽  
Good Policy

The paper analyzes how actual monetary policy changed following the official adoption of inflation targeting in the Czech Republic, Hungary, and Poland and how it affected the volatilities of important macroeconomic variables in the years thereafter. To disentangle the effects of the policy shift from exogenous changes in the volatilities of these variables, a Markov-switching dynamic stochastic general equilibrium model is estimated that allows for regime switches in the policy parameters and the volatilities of shocks hitting the economies. Whereas estimation results reveal periods of high and low volatility for all three economies, the presence of different policy regimes is supported by the underlying data for the Czech Republic and Poland, only. In both economies, monetary policy switched from weak and unsystematic to strong and systematic responses to inflation dynamics. Simulation results suggest that the policy shifts of both central banks successfully reduced inflation volatility in the following years. The observed reduction in output volatility, on the other hand, is attributed more to a reduction in the size of external shocks.

An Evaluation of Monetary Targeting Regimes

2000 ◽  
Vol 174 ◽  
pp. 105-113 ◽  
Author(s):  
Ray Barrell ◽  
Karen Dury
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Price Level ◽  
Policy Framework ◽  
Policy Regime ◽  
Feedback Mechanisms ◽  
Policy Regimes ◽  
Monetary Targeting ◽  
Over Time ◽  
Monetary Policy Framework

The policy regime in Europe has put the economy on ‘auto-pilot’. We investigate different designs for the required feedback mechanisms. The uncertainty facing an economy depends on the pattern of shocks it faces, the response of the private sector to those shocks and also the policy reactions of the authorities. Two ‘ideal type’ policy regimes are investigated, and inflation targeting is compared to nominal aggregate targeting. In general it is suggested that targeting a nominal aggregate reduces the variability of the price level, and stabilises the price level more quickly over time. Inflation outcomes are also less variable for the Euro Area, and they are less asymmetric when a nominal aggregate is targeted. The new European fiscal framework requires that countries set deficit targets close to balance. We show that there is plenty of space for automatic stabilisers to work, but the room available depends in part on the monetary policy framework chosen.

scholarly journals Monetary Policy and Financial Stability

2020 ◽  
Vol 2020 (101) ◽  
pp. 1-36
Author(s):  
Isabel Cairó ◽  
◽  
Jae Sim ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Financial Stability ◽  
Inflation Targeting ◽  
Global Financial Crisis ◽  
Price Stability ◽  
Policy Regimes ◽  
Household Sector ◽  
Nominal Interest Rates ◽  
Credit Cycle

The 2008 Global Financial Crisis called into question the narrow focus on price stability of inflation targeting regimes. This paper studies the relationship between price stability and financial stability by analyzing alternative monetary policy regimes for an economy that experiences endogenous financial crises due to excessive household sector leverage. We reach four conclusions. First, a central bank can improve both price stability and financial stability by adopting an aggressive inflation targeting regime, in the absence of the zero lower bound (ZLB) constraint on nominal interest rates. Second, in the presence of the ZLB constraint, an aggressive inflation targeting regime may undermine both price stability and financial stability. Third, an aggressive price-level targeting regime can improve both price stability and financial stability, regardless of the presence of the ZLB constraint. Finally, a leaning against the wind policy can be detrimental to both price stability and financial stability when the credit cycle is driven by countercyclical household sector leverage. In this environment, leaning with credit spreads can be more effective.

Inflation targeting in the world economy and in Russia

2019 ◽  
pp. 5-29 ◽  
Author(s):  
Boris A. Zamaraev ◽  
Anna M. Kiyutsevskaya
Keyword(s):  
Monetary Policy ◽  
Growth Rates ◽  
Financial Stability ◽  
World Economy ◽  
Inflation Targeting ◽  
Currency Crisis ◽  
Policy Regimes ◽  
Russian Economy ◽  
Consumer Prices ◽  
The World

The authors, analyzing features of realization of monetary policy under inflation targeting, show that its application and evolution are based on the objective reasons related to a decrease of consumer prices growth rates all over the world and an increase of the integration of the world economy. It led to the ineffectiveness of other monetary policy regimes in open economies. It is true also for the Russian economy that has passed the way from financial mechanisms of centralized economy to inflation targeting. Its approaches and instruments have been adjusted in accordance with Russian realities. The authors show that application of inflation targeting regime in Russia along with other measures of macroeconomic policy have become one of the elements of the system of maintaining financial stability after the 2014 currency crisis.

Monetary policy regimes and growth revisited: evidence from a de facto classification

2019 ◽  
Vol 71 (4) ◽  
pp. 908-929
Author(s):  
Kin-Ming Wong ◽  
Terence Tai-Leung Chong
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Inflation Targeting ◽  
Growth Effect ◽  
Empirical Estimation ◽  
New Classification ◽  
Policy Regimes ◽  
Exchange Rate Targeting ◽  
Positive Growth ◽  
Robust Evidence

Abstract Pioneered by New Zealand in 1990, a growing number of countries have adopted the practice of inflation targeting, the international experience of which has been reported as satisfactory. However, existing empirical evidence fails to support inflation targeting as having a positive growth effect. To provide further evidence, this study adopts a new classification system for monetary policy regimes that allows the empirical estimation of the effect of inflation targeting on economic growth in comparison with its main alternative, exchange rate targeting. Our study, which covers more than 100 countries for the 35 years from 1974 to 2009, presents robust evidence that inflation targeting promotes economic growth.

scholarly journals The impact of monetary policy on household consumption in South Africa: Evidence from vector autoregressive techniques

2017 ◽  
Vol 20 (1) ◽  
Author(s):  
Emmanuel Owusu-Sekyere
Keyword(s):  
South Africa ◽  
Monetary Policy ◽  
South African ◽  
Inflation Targeting ◽  
Household Consumption ◽  
Underlying Structure ◽  
Time Varying ◽  
Constant Parameter ◽  
Household Credit ◽  
The Global Financial Crisis

Background: This article adds to scarce sub-Saharan African and South African literature on monetary policy transmission mechanisms by looking into: (1) the Keynesian interest rate channel of monetary policy transmission in South Africa, focussing on the behaviour of household credit and household consumption; (2) using the time-varying parameter vector autoregressive (VAR) techniques with stochastic volatility to capture the time-varying nature of the underlying structure of the South African economy to see whether it performs better than the constant parameter VAR in so doing and (3) policy implications emerging from the findings of the study.Aim: In testing the hypotheses of the interest rate channel of monetary policy transmission, the aim is to see how household credit and ultimately household consumption have evolved in South Africa: (1) before inflation targeting (1994–1999), (2) after inflation targeting (2000–2007) and (3) during the global financial crisis (2007–2012) in response to different monetary policy positioning.Setting: We focus on three periods: post transition from apartheid, during inflation targeting and during the global financial crisis, periods which saw changes in the monetary policy stance in South Africa.Methods: Quarterly data from 1994Q1 to 2012Q4, constant parameter VAR and time-varying parameter vector autoregressive (TVP-VAR) techniques are used in this study. The use of the TVP-VAR is to capture the time-varying nature of the underlying structure of the South African economy and also to investigate whether it performs better than the constant parameter VAR in so doing.Results: The results show that household credit and consumption declined and stayed negative post transition and after inflation targeting – periods of monetary tightening in South Africa - but increased during the global financial crisis, which saw expansionary monetary policy measures aimed at mitigating the negative output gap in South Africa.Conclusion: These changes in household credit and consumption across the different time periods show evidence of the cost of credit effect of monetary policy on household consumption in South Africa. They further reflect the impact of different structural changes and exogenous shocks on monetary policy conduct in South Africa and its pass through effect on household consumption in South Africa. We further conclude that the time TVP-VAR with stochastic volatility performs better than the constant parameter VAR in capturing the time-varying nature of the underlying structure of the South African economy.

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