|DOWNLOAD FILE IN:|
This study discusses recent experiences with inflation targeting (IT), the challenges that it faces since the global financial crisis, and ways to address them. The discussion is conducted from the perspective of upper middle-income countries. As background for the analysis, the study first provides a review of financial systems in middle-income countries or MICS (with a focus on the role of bank credit), the extent to which exposure to capital flows affects economic stability in these countries, and the link between excessive credit growth and financial crises. Then the study reviews the main features and evidence of the performance of inflation-targeting regimes in middle-income countries. It discusses a number of challenges that IT faces, including fiscal dominance, fear or floating, imperfect credibility, and with respect to an explicit financial stability objective assigned to monetary policy. The issue of complementarity between macroprudential regulation and monetary policy, in the context of an `integrated` IT (or IIT) regime, is taken up next. The nature of monetary policy rules in an IIT regime, and their practical implementation, is also discussed. The analysis suggests that there are robust arguments to support the view that under an integrated inflation-targeting regime, monetary policy should react in a state contingent fashion to a credit gap measure—and possibly to the real exchange rate—in order to address the time-series dimension of systemic risk. However, monetary policy and macroprudential policy are largely complementary instruments. They must be calibrated jointly, in the context of macroeconomic models that account for the type of credit market imperfections observed in middle-income countries and for the fact that macroprudential regimes may substantially affect the monetary transmission mechanism.
What happens to firms in the face of financial crises? Little research has been done on the microeconomic implications of financial policies and crises while attention has been focused on the macroeconomic effects of these events. This book attempts to fill this research gap. Credit Constraints and Investment in Latin America contains new evidence on the nature, extent, evolution and consequences ... (View publication)
This paper seeks to identify the main determinants of the formation of inflation expectations in Paraguay since the adoption of the inflation targeting regime. This work bases the analysis on the results obtained from the expectations surveys conducted by the country’s monetary authority. Likewise, it is important to note that the dispersion of respondents’' answers was adjusted within the inf ... (View publication)
This paper analyzes the time-varying degree of inflation expectations anchoring in Bolivia and, more precisely, whether inflation expectations have been in line with the inflation objectives announced by the Central Bank of Bolivia (BCB, for its acronym in Spanish) and if they have become better anchored over time. Two considerations are particularly relevant in this regard. First, the main so ... (View publication)
Hello, Welcome to the IDB!
Please join our mailing list by simply entering your email below.
Show inline popup 1
Show inline popup 2
Show inline popup 3
Show inline popup 4