Inflation Targeting Matters: Evidence from OECD Economies' Sacrifice Ratios

After the financial crisis at the end of the 1990 s many countries rejected fixed exchange rate policy. However actually they failed to proceed to announced "independent float" exchange rate arrangement. This might be due to the "fear of floating" or an irreversible result of inflation targeting central bank policy. In the article advantages and drawbacks of fixed and floating exchange rate arrangements are systematized. Features of new returning to exchange rates stabilization and possible risks of such policy for Russia are considered. Special attention is paid to the issue of choice of a "target" currency composite which can minimize external inflation pass-through.

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Exchange Rate Regimes and Economic Stability

Voprosy Ekonomiki ◽

10.32609/0042-8736-2010-1-29-43 ◽

2010 ◽

pp. 29-43

Author(s):

S. Smirnov

Keyword(s):

Exchange Rate ◽

Inflation Targeting ◽

Exchange Rate Regime ◽

Exchange Rate Policy ◽

Real Sector ◽

Economic Stability ◽

Exogenous Shocks ◽

Floating Exchange Rate ◽

Rate Policy ◽

Managed Floating

The Bank of Russia intends to introduce inflation targeting policy and exchange rate free floating regime in three years. Exogenous shocks absorption which stabilizes the real sector of economy is usually considered to be one of the advantages of free floating exchange rate policy. However, our research based on the analysis of 25 world largest economies exchange rates and industrial production during the crisis of 2008-2009 does not confirm this hypothesis. The article also analyzes additional risks associated with free floating exchange rate regime in Russia and presents some arguments in favor of managed floating exchange rate regime.

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On the Exchange Rate Policy

Voprosy Ekonomiki ◽

10.32609/0042-8736-2010-1-21-28 ◽

2010 ◽

pp. 21-28

Author(s):

K. Yudaeva

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Inflation Targeting ◽

Exchange Rate Policy ◽

Institutional Changes ◽

Crisis Period ◽

Local Currency ◽

High Inflation ◽

Rate Policy ◽

The Exchange Rate

The level of trust in the local currency in Russia is very low largely because of relatively high inflation. As a result, Bank of Russia during crisis times can not afford monetary policy loosening and has to fight devaluation expectations. To change the situation in the post-crisis period Russia needs to live through a continuous period of low inflation. Modified inflation targeting can help achieve such a result. However, it should be amended with institutional changes, particularly development of hedging instruments.

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Monetary policy and the effect of the transfer of oil prices to inflation

Voprosy Ekonomiki ◽

10.32609/0042-8736-2020-8-41-50 ◽

2020 ◽

pp. 41-50

Author(s):

Ph. S. Kartaev ◽

I. D. Medvedev

Keyword(s):

Monetary Policy ◽

Inflation Targeting ◽

Dynamic Models ◽

Oil Prices ◽

Oil Price ◽

Oil Price Shocks ◽

Negative Effects ◽

Price Shocks ◽

Policy Regime ◽

The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

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