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Inflation Targeting in Emerging Economies

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  • Todd B. Walker
Abstract
I document the decline in the rate of inflation in 14 emerging economies after the implementation of an inflation targeting (IT) regime. I briefly describe how each country implements the IT, and argue that the new regime forced policy coordination amongst various governmental units, allowed for a more singular focus, and more transparent policy making process. This allowed agents to better coordinate expectations which precipitated the decline in the rate of inflation. I also document the difficulty with hitting a precise inflation target over a short period of time in the same countries. A model of policy coordination is presented to show how inflation is determined by joint behavior of monetary and fiscal policies. ****** Documento el descenso de la tasa de inflación después de la implementación del régimen de Inflación Objetivo (OI) en 14 economías emergentes. Describo brevemente cómo cada país implementó IO y argumento que el nuevo régimen forzó una coordinación de políticas entre varios entes gubernamentales, esto último facilitado por un proceso de toma de decisiones más transparente y con un enfoque más puntual. Esto permitió que los agentes económicos coordinaran mejor sus expectativas induciendo así una reducción en la tasa de inflación. Para los mismos países, también documento la dificultad de acertar a una meta de inflación precisa en un corto período de tiempo. Para mostrar cómo la inflación está determinada por la acción conjunta de las políticas fiscal y monetaria, presento un modelo de coordinación de políticas.

Suggested Citation

  • Todd B. Walker, 2018. "Inflation Targeting in Emerging Economies," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 36(85), pages 7-20, November.
    • Handle: RePEc:col:000107:016934
    DOI: 10.32468/Espe.8501
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    References listed on IDEAS

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    1. Davig, Troy & Leeper, Eric M., 2011. "Monetary-fiscal policy interactions and fiscal stimulus," European Economic Review, Elsevier, vol. 55(2), pages 211-227, February.
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    7. Frederic S. Miskin & Klaus Schmidt-Hebbel, 2007. "Monetary Policy under Inflation Targeting: An Introduction," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 1, pages 001-022, Central Bank of Chile.
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    Cited by:

    1. Elisangela Araujo & Eliane de Araújo & Mateus Ribeiro da Fonseca & Paulo Mourão, 2023. "External shocks and monetary policy under the inflation targeting regime (ITR): an analysis of the determinants of inflation for the period 2000-2021," PSL Quarterly Review, Economia civile, vol. 76(306), pages 293-311.

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    More about this item

    Keywords

    Inflation Targeting; Emerging Economies; Inflación objetivo; Economías emergentes;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other

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