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Inflation, Credibility, and the Role of the International Monetary Fund

Author: Mr.Carlo Cottarelli

Publisher: International Monetary Fund

Published: 1998-09-01

Total Pages: 26

ISBN-13: 1451969333

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This paper argues that many developing countries may find it difficult to buttress disinflation programs purely through the adoption of traditional credibility-enhancing devices (such as monetary anchors and central bank independence), owing to “technical problems” (for example, high instability of money demand, increased capital mobility) and an insufficient endowment of credibility in the political institutions. In these cases, borrowing credibility from an outside agency like the International Monetary Fund may be the most effective solution. The paper discusses the different options that would allow the Fund to support programs aimed not at external adjustment—the Fund’s traditional role—but at disinflation.

Book Synopsis Inflation, Credibility, and the Role of the International Monetary Fund by : Mr.Carlo Cottarelli

Download or read book Inflation, Credibility, and the Role of the International Monetary Fund written by Mr.Carlo Cottarelli and published by International Monetary Fund. This book was released on 1998-09-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper argues that many developing countries may find it difficult to buttress disinflation programs purely through the adoption of traditional credibility-enhancing devices (such as monetary anchors and central bank independence), owing to “technical problems” (for example, high instability of money demand, increased capital mobility) and an insufficient endowment of credibility in the political institutions. In these cases, borrowing credibility from an outside agency like the International Monetary Fund may be the most effective solution. The paper discusses the different options that would allow the Fund to support programs aimed not at external adjustment—the Fund’s traditional role—but at disinflation.

Credibility and Exchange Rate Management in Developing Countries

Author: Pierre-Richard Agénor

Publisher: International Monetary Fund

Published: 1991-09-01

Total Pages: 43

ISBN-13: 1451850921

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The paper examines the role of credibility in the conduct of exchange rate policy in developing countries, The analysis is based on a model in which policymakers are concerned about inflation and external competitiveness. Price setters in the nontraded goods sector of the economy adjust prices in reaction to anticipated fluctuations in the domestic price of tradable goods. This type of model is showm to generate a “devaluation bias” which undermines the credibility of a fixed exchange rate. The effect of reputational factors, signaling considerations, and joining a currency union as possible solutions to this bias is examined.

Book Synopsis Credibility and Exchange Rate Management in Developing Countries by : Pierre-Richard Agénor

Download or read book Credibility and Exchange Rate Management in Developing Countries written by Pierre-Richard Agénor and published by International Monetary Fund. This book was released on 1991-09-01 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper examines the role of credibility in the conduct of exchange rate policy in developing countries, The analysis is based on a model in which policymakers are concerned about inflation and external competitiveness. Price setters in the nontraded goods sector of the economy adjust prices in reaction to anticipated fluctuations in the domestic price of tradable goods. This type of model is showm to generate a “devaluation bias” which undermines the credibility of a fixed exchange rate. The effect of reputational factors, signaling considerations, and joining a currency union as possible solutions to this bias is examined.

Credibility of Central Bank Independence Revisited

Author: Mr.Timo Valila

Publisher: International Monetary Fund

Published: 1999-01-01

Total Pages: 17

ISBN-13: 1451841744

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The specific role of central bank independence in determining the overall credibility of monetary policy is addressed in this paper. It is argued that the credibility of delegating monetary policy to an independent central bank is endogenous to the credibility of the inflation target because a “conservative” inflation target may not be compatible with the fiscal policy stance. Also, lack of transparency in designing the institutional set-up is shown to be welfare-reducing.

Book Synopsis Credibility of Central Bank Independence Revisited by : Mr.Timo Valila

Download or read book Credibility of Central Bank Independence Revisited written by Mr.Timo Valila and published by International Monetary Fund. This book was released on 1999-01-01 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: The specific role of central bank independence in determining the overall credibility of monetary policy is addressed in this paper. It is argued that the credibility of delegating monetary policy to an independent central bank is endogenous to the credibility of the inflation target because a “conservative” inflation target may not be compatible with the fiscal policy stance. Also, lack of transparency in designing the institutional set-up is shown to be welfare-reducing.

Monetary Policy Credibility and Exchange Rate Pass-Through

Author: Mr.Yan Carriere-Swallow

Publisher: International Monetary Fund

Published: 2017-01-18

Total Pages: 33

ISBN-13: 1475569211

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A long-standing conjecture in macroeconomics is that recent declines in exchange rate pass-through are in part due to improved monetary policy performance. In a large sample of emerging and advanced economies, we find evidence of a strong link between exchange rate pass-through to consumer prices and the monetary policy regime’s performance in delivering price stability. Using input-output tables, we decompose exchange rate pass-through to consumer prices into a component that reflects the adjustment of imported goods at the border, and another that captures the response of all other prices. We find that price stability and central bank credibility have reduced the second component.

Book Synopsis Monetary Policy Credibility and Exchange Rate Pass-Through by : Mr.Yan Carriere-Swallow

Download or read book Monetary Policy Credibility and Exchange Rate Pass-Through written by Mr.Yan Carriere-Swallow and published by International Monetary Fund. This book was released on 2017-01-18 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: A long-standing conjecture in macroeconomics is that recent declines in exchange rate pass-through are in part due to improved monetary policy performance. In a large sample of emerging and advanced economies, we find evidence of a strong link between exchange rate pass-through to consumer prices and the monetary policy regime’s performance in delivering price stability. Using input-output tables, we decompose exchange rate pass-through to consumer prices into a component that reflects the adjustment of imported goods at the border, and another that captures the response of all other prices. We find that price stability and central bank credibility have reduced the second component.

Why Inflation Targeting?

Author: Charles Freedman

Publisher: International Monetary Fund

Published: 2009-04-01

Total Pages: 27

ISBN-13: 145187233X

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This is the second chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." We begin by discussing the costs of inflation, including their role in generating boom-bust cycles. Following a general discussion of the need for a nominal anchor, we describe a specific type of monetary anchor, the inflation-targeting regime, and its two key intellectual roots-the absence of long-run trade-offs and the time-inconsistency problem. We conclude by providing a brief introduction to the way in which inflation targeting works.

Book Synopsis Why Inflation Targeting? by : Charles Freedman

Download or read book Why Inflation Targeting? written by Charles Freedman and published by International Monetary Fund. This book was released on 2009-04-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the second chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." We begin by discussing the costs of inflation, including their role in generating boom-bust cycles. Following a general discussion of the need for a nominal anchor, we describe a specific type of monetary anchor, the inflation-targeting regime, and its two key intellectual roots-the absence of long-run trade-offs and the time-inconsistency problem. We conclude by providing a brief introduction to the way in which inflation targeting works.

Credibility Without Rules

Author: Mr.Carlo Cottarelli

Publisher: International Monetary Fund

Published: 1997-12-23

Total Pages: 108

ISBN-13: 9781557756442

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During the last 25 years, monetary practice in most countries has increasingly been characterized by the attempt to achieve credibility of purpose while expanding the freedom of monetary authorities in controlling policy instruments. Thus, the world has moved toward monetary frameworks in which, through appropriate institutional devices, a better trade-off between credibility of goals and flexibility of instruments could be achieved. This attempt, surveyed in this paper, has taken many forms, depending on the countries economic, institutional, and cultural specificities.

Book Synopsis Credibility Without Rules by : Mr.Carlo Cottarelli

Download or read book Credibility Without Rules written by Mr.Carlo Cottarelli and published by International Monetary Fund. This book was released on 1997-12-23 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the last 25 years, monetary practice in most countries has increasingly been characterized by the attempt to achieve credibility of purpose while expanding the freedom of monetary authorities in controlling policy instruments. Thus, the world has moved toward monetary frameworks in which, through appropriate institutional devices, a better trade-off between credibility of goals and flexibility of instruments could be achieved. This attempt, surveyed in this paper, has taken many forms, depending on the countries economic, institutional, and cultural specificities.

Credibility and Nominal Debt

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 1989-09-14

Total Pages: 28

ISBN-13: 1451958501

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This paper focuses on the role of debt maturity in managing the government’s incentives to use opportunistic inflation to reduce the ex post real value of its nominal liabilities. The maturity structure of government debt is shown to be a powerful instrument to affect the time profile of the inflation tax base and, hence, to mitigate the distortions introduced by time inconsistency on taxation policies. The nature of the optimal policy is shown to be heavily dependent on the type of precommitment enjoyed by policymakers.

Book Synopsis Credibility and Nominal Debt by : International Monetary Fund

Download or read book Credibility and Nominal Debt written by International Monetary Fund and published by International Monetary Fund. This book was released on 1989-09-14 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on the role of debt maturity in managing the government’s incentives to use opportunistic inflation to reduce the ex post real value of its nominal liabilities. The maturity structure of government debt is shown to be a powerful instrument to affect the time profile of the inflation tax base and, hence, to mitigate the distortions introduced by time inconsistency on taxation policies. The nature of the optimal policy is shown to be heavily dependent on the type of precommitment enjoyed by policymakers.

Contacts, Credibility and Common Knowledge

Author: Marcus Miller

Publisher:

Published: 1999

Total Pages: 13

ISBN-13:

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Book Synopsis Contacts, Credibility and Common Knowledge by : Marcus Miller

Download or read book Contacts, Credibility and Common Knowledge written by Marcus Miller and published by . This book was released on 1999 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt:

The Role of the Exchange Rate in Inflation-Targeting Emerging Economies

Author: Anna Nordstrom

Publisher: International Monetary Fund

Published: 2009-11-24

Total Pages: 106

ISBN-13: 1589067967

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This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy tool for influencing activity and inflation, and there is little agreement about the appropriate role of the exchange rate.The exchange rate is a more important monetary policy tool for emerging economies that have adopted inflation targeting than it is for inflation-targeting advanced economies. Inflation-targeting emerging economies generally have less flexible exchange rate arrangements and intervene more frequently in the foreign exchange market than their advanced economy counterparts. The enhanced role of the exchange rate reflects these economies' greater vulnerability to exchange rate shocks and their less developed financial markets. However, their sharper focus on the exchange rate may cause some confusion about the commitment of their central banks to achieve the inflation target and may also complicate policy implementation. Global inflation pressures, greater exchange rate volatility, and the financial stresses from the global financial turmoil that began in mid-2007 are heightening these tensions.

Book Synopsis The Role of the Exchange Rate in Inflation-Targeting Emerging Economies by : Anna Nordstrom

Download or read book The Role of the Exchange Rate in Inflation-Targeting Emerging Economies written by Anna Nordstrom and published by International Monetary Fund. This book was released on 2009-11-24 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the role of exchange rates in emerging economies with inflation-targeting regimes, an issue that has become especially germane during the current episode of financial turmoil and volatile capital flows. Under inflation targeting, the interest rate is the main monetary policy tool for influencing activity and inflation, and there is little agreement about the appropriate role of the exchange rate.The exchange rate is a more important monetary policy tool for emerging economies that have adopted inflation targeting than it is for inflation-targeting advanced economies. Inflation-targeting emerging economies generally have less flexible exchange rate arrangements and intervene more frequently in the foreign exchange market than their advanced economy counterparts. The enhanced role of the exchange rate reflects these economies' greater vulnerability to exchange rate shocks and their less developed financial markets. However, their sharper focus on the exchange rate may cause some confusion about the commitment of their central banks to achieve the inflation target and may also complicate policy implementation. Global inflation pressures, greater exchange rate volatility, and the financial stresses from the global financial turmoil that began in mid-2007 are heightening these tensions.

Intervention Under Inflation Targeting--When Could It Make Sense?

Author: Mr.David J Hofman

Publisher: International Monetary Fund

Published: 2020-01-17

Total Pages: 22

ISBN-13: 1513526022

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We investigate the motives inflation-targeting central banks in emerging markets may have for intervening in foreign exchange markets and evaluate the case for such interventions based on the existing literature. Our findings suggest that the rationale for interventions depends on initial conditions and country-specific circumstances. The case is strongest in the presence of large currency mismatches or underdeveloped markets. While interventions can have benefits in the short-term, sustained over time they could entrench unfavorable initial conditions, though more work is needed to establish this empirically. A first effort to measure the cost of interventions to the credibility of policy frameworks suggests that the negative impact may be smaller than often assumed—at least for the set of more sophisticated inflation-targeting emerging-market central banks considered here.

Book Synopsis Intervention Under Inflation Targeting--When Could It Make Sense? by : Mr.David J Hofman

Download or read book Intervention Under Inflation Targeting--When Could It Make Sense? written by Mr.David J Hofman and published by International Monetary Fund. This book was released on 2020-01-17 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the motives inflation-targeting central banks in emerging markets may have for intervening in foreign exchange markets and evaluate the case for such interventions based on the existing literature. Our findings suggest that the rationale for interventions depends on initial conditions and country-specific circumstances. The case is strongest in the presence of large currency mismatches or underdeveloped markets. While interventions can have benefits in the short-term, sustained over time they could entrench unfavorable initial conditions, though more work is needed to establish this empirically. A first effort to measure the cost of interventions to the credibility of policy frameworks suggests that the negative impact may be smaller than often assumed—at least for the set of more sophisticated inflation-targeting emerging-market central banks considered here.