The main objective of the thesis is to analyse the suitability of inflation targeting, a monetary policy regime which focuses on the achievement of the price stability, for the emerging market economies. The performance of inflation targeting countries is compared to the performance of non-inflation targeting countries which use other monetary policies such as the monetary aggregate target or exchange rate anchor. Regressions, using the difference-in-differences estimation approach, are run to assess the contribution of the inflation targeting framework to the development of economic variables such as the CPI, GDP, national interest rate etc. Economic outcomes of the financial crisis period (2007- 2010) are crucial part of the thesis. The convenience of the inflation targeting framework for the emerging market economies is derived. This holds also for the severe situations such as the crisis since it lowers the volatility of the main variables of the interest. Keywords: inflation targeting, monetary economics, monetary policy, emerging market economies, difference in differences estimation, financial crisis

The present paper has attempted to provide an empirically argumented basis on the existing conflict about effectiveness of IT regime on lowering inflation and inflation volatility. In the first part we perform panel analysis on a group of 43 emerging and developing economies for a more recent period ranging from 1997 to 2011, distinguishing between normal and crisis times as well as between geographical regions. Differently from common studies we applied dynamic panel model specification that controls for reverse causality of regime adoption. Despite broad arguments addresing IT ineffectiveness, our results support the regime and imply that shifting to IT will lower both inflation and inflation volatility in normal times. Model specification during the external shocks was inconclusive on the selected sample with relatively recent IT history. Regarding the geographical IT performance, we outlined that regime effectiveness was uniform along analyzed regions. In the second part we perform a preliminary analysis of a developing economy IT experience and conclude that, even though there are some problems of technical nature and main policy rate is still a weak instrument of transmission channel, the Republic of Moldova chose right time for regime adoption and has made considerable progress towards the...

Thesis advisor: Matteo Iacoviello / Thesis advisor: Peter Ireland / Thesis advisor: Scott Schuh / These three essays are concerned with macroeconomic and monetary policy issues relating to the housing market and inflation-targeting. The essays can be characterized as applied macroeconomics in nature as they use insights from theory to construct macroeconomic models, which are then taken to the data. The first chapter in this study utilizes microeconomic evidence that nominal loss aversion plays a role in the pricing of housing services and explores the extent to which this phenomenon in the housing sector affects the macroeconomy as a whole. A two sector Dynamic Stochastic General Equilibrium model of housing and consumption goods with downward nominal price rigidity in the housing sector is constructed to examine how asymmetries in the nominal pricing of housing services affects monetary policy in stabilizing the economy in response to shocks. A calibration exercise is also performed to gain insight to what degree pricing dynamics in the housing sector are driven by the tendency of sellers to be nominally loss averse. The second chapter explores the disparities in the success rate in hitting an explicit inflation target among OECD and Emerging Market inflation targeters. The study proposes a framework to try to circumvent the "good luck"/"good policy" forces as drivers of better inflation-targeting outcomes by estimating a measure of central bank credibility in targeting regimes. Two main findings are that Emerging Market targeting banks are less successful than their OECD counterparts in establishing credibility in targeting inflation and that credible regimes last on the order of five to ten times as long as the relatively short-lived incredible regimes for the two groups of targeting countries. The third chapter, co-authored with Scott Schuh of the Federal Reserve Bank of Boston, takes a preliminary empirical step to model inflation outcomes for inflation band-targeting countries which allows us to isolate the empirical determinants of inflation escaping from the targeted band. We also use our framework to determine whether US inflation is consistent with inflation under an explicit targeting regime. Our model generates the result that US inflation during the last decade is well predicted by a model of inflation-targeting countries. / Thesis (PhD) — Boston College, 2008. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

The aim of the thesis is to study the performance of emerging economies under the inflation targeting as a framework. This framework is characterized by the direct target that it has on inflation which should be achieved within a period. Inflation targeting was initially adopted by industrialized economies, and the outcomes throughout the years have been substantially good for other economies to join this framework. The dataset used is updated with data from after the financial crises allowing space for us to test another hypothesis about the importance of inflation targeting during the financial crises. We used difference to difference model to test our hypothesis and we concluded that inflation targeting does not have any significant statistical effect on the output growth, but it does have a statistical significant effect in the inflation rate. We also pointed out that the economies that were targeting inflation during the financial crises performed much better compared to the ones which did not. JEL Classification E31, E44, G01 Keywords Inflation targeting, emerging and developed economies, financial crises Author's e-mail sreshketa@gmail.com Supervisor's e-mail tomas.holub@cnb.cz

Inflation targeting has become an increasingly popular regime among emerging markets. Focusing on the experience of inflation targeting adoption in the countries in Central and Eastern Europe and Commonwealth of Independent States, this thesis highlights the main features of the inflation targeting framework. A clear economic condition bringing these countries together is considered the dollarization issue which gains importance when designing the inflation targeting framework. The empirical study on the impact of inflation targeting in inflation, inflation volatility, output, output volatility and deposit dollarization shows clear benefits of inflation targeting in terms of inflation and inflation volatility, which are not achieved at the expense of output growth. Also, dollarization does not harm the positive impact of inflation targeting on inflation.

Cette thèse regroupe un ensemble de quatre articles analysant la conduite de la politique monétaire dans les économies émergentes qui ont adopté un régime de ciblage d'inflation. La première partie de ce travail est basée sur une approche positive, qui s'appuie sur l'expérience des 19 économies qui se sont dotées de ce cadre institutionnel. Nous examinons quel régime de change ces économies ont choisi, ainsi que les déterminants de leur choix. Ainsi, un premier chapitre propose une nouvelle méthode de classification des régimes de change par l'estimation de mixtures de Gaussienne, alors qu'un second chapitre privilégie l'économétrie de panel pour analyser les déterminants des régimes observés. Puis, dans une démarche normative, nous analysons dans la seconde partie de cette thèse comment définir la politique monétaire optimale. Notre approche s'appuie alors sur la modélisation d'équilibre général dynamique et stochastique. Nous étudions quelle politique doit être menée par les autorités monétaires d'économies émergentes confrontées à des chocs sur le prix des matières premières et alimentaires, et à des inégalités d'accès au crédit. / This PhD dissertation is made of four papers on central banking in inflation-targeting emerging economies. The first part of the dissertation is dedicated to two empirical works, based on the experiences of the 19 emerging economies that have adopted an inflation-targeting framework. I examine what exchange rate arrangement these economies are implementing together with the inflation targeting strategy, and what can explain their choice. ln the first chapter, I propose a new method to build up taxonomies of exchange-rate regimes. My approach is based on Gaussian mixture estimates. ln the second chapter, the choices for exchange-rate arrangements are explained though panel econometrics analysis. The second part of the dissertation is about the theory of optimal monetary policy. ln the first chapter, I propose an original dynamic stochastic general equilibrium model to study what should monetary policy do when food price hikes, in a small open emerging economy. ln the last chapter, a similar modeling approach is used to analysis how credit constraints impact monetary policy in financially venerable emerging economies.

No description available.

Research report (M.Com. (Development Theory and Policy))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Business and Economic Sciences, 2013. / The global financial crisis has shaken not only the foundations of the financial system but also elements of macroeconomic stability, particularly monetary policy as it relates to the central bank institution and its fundamental operations. This paper is centred on examining the aspects of the inflation-targeting framework both theoretically and practically, as the fulcrum around which modern central banking functions, in the context of the crisis and the economic conditions thereafter. This discussion is based on the idea that there exist spaces for broadening and extending the mandate of the central bank beyond inflation targeting and that crisis conditions have gone to show that.

The South African Reserve Bank (SARB) moved to an official inflation targeting regime in the February of 2000, with the sole aim of maintaining the CPIX inflation between a target-band of three to six percent. Against this backdrop, this thesis, over seven independent chapters with a common theme, evaluates the inflation targeting regime in terms of welfare cost estimates and mean and volatility of inflation in the post-targeting period. Chapters 2 and 3 use the partial equilibrium money demand approach based on cointegration and long-horizon estimation techniques, to derive the welfare cost estimates. Given the sensitivity of the results to the estimation techniques, chapter 4 carries out a robustness check for the two estimation methods based on data aggregation. The chapter 4 finds the long-horizon method to be more robust, and shows that the welfare cost estimate lies between 0.15 percent to 0.41 percent of GDP across the width of the target band. Realizing that partial equilibrium approaches are merely one-dimensional, in the sense that it fails to account for the fact that inflation, operating in conjunction with the tax system, has further distortionary effects, we re-evaluate the welfare costs in chapter 5 using a more general micro-level approach. The welfare cost estimates are found to increase by nearly one and half times when compared to the partial equilibrium approaches. This estimate increases by more than twice, when we adopt a dynamic general equilibrium endogenous growth model to calculate the welfare cost of inflation in chapter 6. In chapters 7 and 8 we carry out counterfactual experiments based on a model of dynamic time inconsistency and cosine-squared cepstrum. Specifically, we ask the question: If the mean and volatility of inflation would have been higher or lower had the SARB continued to pursue its pre-targeting monetary policy approach. We find the evidence that the mean and volatility in the post-targeting era is higher than it would have been had the SARB continued to stick to its pre-targeting monetary policy framework. Based on our results, we conclude that there can be large gains by considering a narrower (and possibly lower) target band. / Thesis (PhD)--University of Pretoria, 2010. / Economics / unrestricted

Inflation targeting is a monetary policy regime, characterized by public announcement of official target ranges or quantitative targets for price level increases and by explicit acknowledgement that low inflation is the most crucial long-run objective of the monetary authorities. There are three prerequisites for inflation targeting: 1)central bank independence,2)having a sole target,3)existence of stable and predictable relationship between monetary policy instruments and inflation.In many developing countries, the use of seigniorage revenues as an important source of financing public debts, the lack of commitment to low inflation as a primary goal by monetary authorities, considerable exchange rate flexibility, lack of substantial operational independence of the central bank or of powerful models to make domestic inflation forecasts hinder the satisfaction of these requirements. This study investigates the applicability of inflation targeting to the Turkish economy. Central bank independence in Turkey has been mainly hindered by "fiscal dominance" through monetization of high budget deficits. In addition, although serious steps have been taken recently under a new law to have an independent central bank, such as formal commitment to the achievement of price stability as the primary objective and the prohibition of credit extension to the government, the central bank does not satisfy independence criteria due to the problems associated with the appointment of the government and the share of the Treasury within the bank. Having a sole inflation target was hindered by the existence of fixed exchange rate system throughout the years. However, in February 2001, Turkey switched to a floating exchange rate regime, which is important for a successful inflation-targeting regime. Having a sole target within the system has also been supported by the new central bank law, which gives priority to price stability and supports any other objective as long as it is consistent with price stability. In this thesis, an empirical investigation has been made in order to assess the statistical readiness of Turkey to satisfy the requirements of inflation-targeting by making use of vector autoregressive (VAR) models. The results suggest that inflation is an inertial phenomenon in Turkey and money, interest rates and nominal exchange rates innovations are not economically and statistically important determinants of prices. Most of the variances in prices are explained by prices themselves. According to the VAR evidence, the direct linkages between monetary policy instruments and inflation do not seem to be strong, stable, and predictable. As a result, while the second requirement of the inflation-targeting regime seems to have been satisfied, there are still problems associated with the central bank independence and the existence of stable and predictable relationship between monetary policy instruments and inflation in Turkey. / Master of Arts