scholarly journals MACROFINANCIAL RESPONSIBILITY OF CENTRAL BANKS: THEORETICAL FOUNDATION AND INSTITUTIONAL DILEMMAS

2018 ◽  
pp. 89-107
Author(s):  
Viktor KOZIUK
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Commodity Prices ◽  
Macroeconomic Policy ◽  
Structural Features ◽  
Political Regime ◽  
Price Stability ◽  
Sovereign Wealth Funds ◽  
Policy Regime ◽  
Rich Countries

Introduction. Prediction that price stability as well as inflation targeting in commodity rich countries is very fragile typically based on logical relation between commodity prices fluctuations and macroeconomic instability. But in the same time, while counter-cyclical instruments appear, commodity prices shock should be taken as supply shock. Thus, inflation instability in resource rich countries should be taken as consequences of macroeconomic mismanagement. Purpose. The purpose of the paper is to validate rejection of fatalism in negative influence of resource richness on price stability. Also it is important to show that inflation targeting regime compatible with large commodities export. In the same time it is necessary to take into account political regime as a supporting factor of adoption that regime of macroeconomic policy that is consistent with price stability. Results. It is proved empirically that commodity abundance per se is not in conflict with price stability. We rich such conclusions basing on simple multifactor regression model that combine macroeconomic policy regime dummies (maturity of inflation targeting, sovereign wealth fund in operation, central bank independence, exchange rate regime) and structural features of the resource rich economies like commodity export, economic complexity, financial depth, democracy. On example of 68 resource rich countries it is shown that price stability parameters (mean inflation, 1999-2017 and standard deviation of it) are not in undoubtfull relation with fraction of nonmerchandise export, but they are in opposite relation with inflation targeting and sovereign wealth funds dummies. Resource endowed countries are not homogenous from political regime point of you. Such regime is important driver of macroeconomic policy choice. Advanced democracies are likely to choose inflation targeting, flexible exchange rate and central bank independence, while wealthy autarkies are likely to prefer fixed exchange rates and sovereign wealth funds. It is mean that price stability is not just vulnerable to commodity factor but is to unstable political regime under which it is hard to implement counter-cyclical regime of macroeconomic policy. Conclusions. Commodity wealth is not precondition to price instability. But political regime is important activate that type of macroeconomic policy regime that consistent with low and stable inflation. By the structural features Ukraine is closer to democracies with mean level of economic complexity and financial depth. Due this inflation targeting regime is more appropriate meaning priority of price stability and exchange rate flexibility.

scholarly journals Price Stability and Inflation Targeting in Commodity Economies: Macroeconomics versus a Political Economy?

2018 ◽  
pp. 4-24 ◽  
Author(s):  
Viktor Koziuk ◽  
Keyword(s):  
Inflation Targeting ◽  
Political Regime ◽  
Price Stability ◽  
Economic Stability ◽  
Stability Parameters ◽  
Sovereign Wealth Funds ◽  
Resource Rent ◽  
Poor Countries ◽  
Resource Wealth ◽  
Rich Countries

In this study, the author argues that maintaining price stability in commodity economies is influenced by their resource rent distribution and that economic stability is extremely sensitive to the nature of a political regime. The commodity factor alone is shown not to be an impediment to maintaining price stability and implementing inflation targeting. An empirical analysis based on data from 68 resource-rich countries provides evidence that the link between the timing of the implementation of inflation targeting and resource wealth variables is not skewed towards resource-poor countries. This study finds that among democracies, inflation targeters demonstrate the best price stability parameters, the most flexible exchange rates, more independent central banks, and more diversified economies, while among autocracies, the best parameters are seen in countries that have sovereign wealth funds.

scholarly journals Towards Full-Fledged Inflation Targeting Monetary Policy Regime in Mauritius

2021 ◽  
Vol 14 (3) ◽  
pp. 126
Author(s):  
Ashwin Madhou ◽  
Tayushma Sewak ◽  
Imad Moosa ◽  
Vikash Ramiah ◽  
Florian Gerth
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Structural Features ◽  
Policy Framework ◽  
Price Stability ◽  
Policy Regime ◽  
Practical Model ◽  
Analysis System ◽  
Emerging And Developing Countries ◽  
Monetary Policy Framework

An increasing number of emerging and developing countries have adopted or are transitioning towards full-fledged inflation targeting (FFIT) as the main monetary policy framework to anchor inflation. In this paper, we explore the FFIT regime as a means for Mauritius to achieve stable inflation, anchor inflationary expectations and establish credibility in committing monetary policy towards price stability as its primary goal. This paper reviews and highlights issues experienced with the current monetary policy framework and the challenges in transitioning towards FFIT. Given that forecasting is central to FFIT, we develop a practical model-based forecasting and policy analysis system (FPAS) to support transition to FFIT, taking into account structural features and shocks that are specific to the Mauritius economy.

The Copper Sector, Fiscal Rules, and Stabilization Funds in Chile

2018 ◽  
Author(s):  
Andres Solimano ◽  
Diego Calderón Guajardo
Keyword(s):  
Exchange Rate ◽  
Opportunity Cost ◽  
Inflation Targeting ◽  
Commodity Prices ◽  
Flexible Exchange Rate ◽  
Fiscal Rules ◽  
Price Shocks ◽  
Sovereign Wealth Funds ◽  
Fiscal Rule ◽  
The Business Cycle

Historically Chile’s economy has been dominated by mineral products (mainly copper) as a source of exports and fiscal revenues. Copper prices and other commodity prices are often volatile. Since the 1980s the authorities have developed various mechanisms to cope with copper price shocks and dampen their effects on the business cycle. These mechanisms include a fiscal rule and a stabilization fund under a flexible exchange rate and an inflation-targeting regime. Apparently, this macro framework has been associated (causality is another matter) with reasonably good macro outcomes. However, this framework entails more discretion and less flexibility than often portrayed. (i) The mechanisms described include frequent revisions in the target fiscal surplus. (ii) Sovereign wealth funds, while defining rules for accumulating resources in good times, provide no rules for using them in bad times. (iii) They entail a possible bias towards over-accumulation of funds, with an ensuing opportunity cost.

The influence of inflation targeting on the pass-through effect of the exchange rate

2018 ◽  
pp. 70-84
Author(s):  
Ph. S. Kartaev ◽  
Yu. I. Yakimova
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Short And Long Term ◽  
The Exchange Rate ◽  
Pass Through ◽  
The Impact

The paper studies the impact of the transition to the inflation targeting regime on the magnitude of the pass-through effect of the exchange rate to prices. We analyze cross-country panel data on developed and developing countries. It is shown that the transition to this regime of monetary policy contributes to a significant reduction in both the short- and long-term pass-through effects. This decline is stronger in developing countries. We identify the main channels that ensure the influence of the monetary policy regime on the pass-through effect, and examine their performance. In addition, we analyze the data of time series for Russia. It was concluded that even there the transition to inflation targeting led to a decrease in the dependence of the level of inflation on fluctuations in the ruble exchange rate.

scholarly journals Albania's Monetary Policy and the Basic Indicators that Effect the Economic Growth

2019 ◽  
Vol 2 (2) ◽  
pp. 51
Author(s):  
Bernard Balla
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Full Employment ◽  
Price Stability ◽  
Macroeconomic Policies ◽  
Consumer Prices

Macroeconomic policies aim to stabilize the economy by achieving their goal of price stability, full employment and economic growth. Price stability is the responsibility of macroeconomic policies that are developed to maintain a low inflation rate, contribute to the solidity of the domestic product and maintain an exchange rate that can be predictable. The purpose of this paper is to analyze Albania's monetary policy by highlighting the main indicators that can be used as a measurement of the efficiency of this policy in the economic development. The literature review shows that there are many attitudes regarding the factors that need to be taken into consideration when analyzing monetary policies, including the elements of fiscal policies. In the Albanian economy, the prices and the level of inflation are the most important aspects. The Bank of Albania uses the inflation targeting regime, considering that the main indicator of inflationary pressures in the economy is the deviation of inflation forecasted in the medium term by its target level. In numerical terms, the bank intends to maintain its annual growth in consumer prices at the level of 3%. According to the latest reports published by the Bank of Albania in 2019, monetary policy continues to contribute positively to a financial environment with a low interest rate and an annual inflation rate of 2%. Although the inflation rate hit the lowest value of 1.8 % in 2018, a balanced rate was achieved through the reduction of interest rates and risk premiums in financial markets and, more recently, through the tightening of the exchange rate. These monetary conditions are appropriate to support the growth of domestic demand and the strengthening of inflationary pressures.

Monetary Policy and Oil Prices

2011 ◽  
Vol 11 (3) ◽  
pp. 1850232
Author(s):  
Mehdi S. Monadjemi
Keyword(s):  
Monetary Policy ◽  
International Trade ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Commodity Prices ◽  
Oil Prices ◽  
Central Banks ◽  
Trade Shocks ◽  
The Exchange Rate

Because of volatility, commodity prices are excluded from the CPI when inflation targeting is exercised. Rising commodity prices contribute to inflation but central banks show no reaction since the CPI does not register rise in prices. Frankel (2006) argues that monetary policy should consider the price of important export commodities such as oil, in oil exporting countries. He maintains that by doing so, central banks are able to benefit from the fluctuations of the exchange rate in the presence of a negative international trade shocks. Central banks cannot benefit from the fluctuation of the exchange rate if inflation targeting is the strategy for conducting monetary policy.

On the limits of the possibility of inflation targeting

2017 ◽  
pp. 71-87
Author(s):  
K. Korishchenko ◽  
N. Pilnik
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Econometric Model ◽  
Oil Prices ◽  
Policy Regime ◽  
Russian Economy ◽  
Exchange Rate Management ◽  
Price Growth ◽  
Main Factors ◽  
Main Determinants

The purpose of this article is to identify the main determinants of consumer price growth in the Russian economy. To achieve this goal, the degree of influence on inflation of the monetary policy of the Bank of Russia, tariff regulation and ruble exchange rate has been determined in the course of the work. The econometric model of inflation formation is used as a research tool depending on the dynamics of the main factors. The article explores the reasons for the significant growth in the volatility of the dollar and, as a consequence, its impact on consumer inflation. According to the presented model, the main volatility generators are the volatility of oil prices and the policy regime of exchange rate management.

Prospects of the Initiation of Inflation Targeting in RF

2008 ◽  
pp. 46-57 ◽  
Author(s):  
A. Ulyukaev ◽  
S. Drobyshevsky ◽  
P. Trunin
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Economic Performance ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Monetary Authorities ◽  
The Exchange Rate

Bank of Russia officials have recently declared the possibility of switching to the inflation targeting regime in the medium run. The article considers benefits and shortcomings of monetary policy regime as well as the economic performance of the inflation targeting countries. The authors conclude that Russia now starts meeting conditions crucial for the success of inflation targeting. In such circumstances Russian monetary authorities have an opportunity to weaken the exchange rate goal in favor of the inflation goal.

Small size blunts African sovereign wealth funds scope

2018 ◽  
Keyword(s):  
Commodity Prices ◽  
Institutional Development ◽  
Economic Transformation ◽  
The Other ◽  
Marginal Revenue ◽  
Sovereign Wealth Funds ◽  
Content Type ◽  
Sub Saharan ◽  
The One ◽  
Rich Countries

Subject African Sovereign Wealth Funds Significance Sub-Saharan African (SSA) sovereign wealth funds (SWFs) are yet to live up to the promise of transforming the structure of resource-rich countries by creating significant inter-generational assets such as improved infrastructure. On the one hand, political constraints in most establishing countries have limited capitalisation of funds. On the other, low returns on investments only provide marginal revenue diversification benefits. As a result, SWFs have largely failed as a mechanism for insulating minerals exporters from lower commodity prices. Impacts With just 10% of SWF assets allocated to infrastructure, their chances of engineering a Botswana-style economic transformation are remote. Measures of overall institutional development will remain better predictors of the likely success of SWFs than fund-specific ones. A concentration of SWFs' investments in hotels and real estate will perpetuate a preference for consumption over intergenerational equity.

scholarly journals Price Stability in Open-Economy under Inflation Targeting Regime with Factors Influencing Inflation Volatility

2014 ◽  
Vol 1 (2) ◽  
pp. 30
Author(s):  
Abdelkader Aguir
Keyword(s):  
Open Economy ◽  
Inflation Targeting ◽  
Price Stability ◽  
Inflation Expectations ◽  
Medium Term ◽  
Policy Regime ◽  
Inflation Volatility ◽  
Factors Influencing ◽  
Emerging Country ◽  
General Reduction

This paper analyzes the relevance of the inflation targeting (IT) policy in achieving its primary goal of medium term price stability in a economic emerging country experience with ‘inflation targeting’. It finds that this monetary policy regime has been associated with a general reduction in inflation, principally through a reduction in inflation expectations. The question addressed in this section is to identify factors that may influence volatility of inflation and why some countries are more successful than others adopting the policy of inflation targeting.

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