Inflation Targeting in Georgia: Are We There Yet?

Author/Editor:

Giorgi Bakradze ; Andreas Billmeier

Publication Date:

August 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper evaluates whether Georgia is ready to adopt inflation targeting (IT), a monetary policy framework that several emerging markets have adopted recently. After reviewing selected prerequisites for successfully implementing IT, the paper focuses on whether one specific precondition is in place-an empirically stable monetary transmission mechanism. Building on a baseline VAR model, it presents several extensions to explore the various channels using causality tests, impulse responses, and variance decompositions. The paper finds that once the central bank overcomes some institutional and operational weaknesses and establishes a more reliable transmission mechanism, it could adopt IT over the medium term.

Series:

Working Paper No. 2007/193

Subject:

English

Publication Date:

August 1, 2007

ISBN/ISSN:

9781451867572/1018-5941

Stock No:

WPIEA2007193

Pages:

33

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