Inflation Targeting Regimes

IMF Working Papers, January 1, 2003

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Inflation Targeting Regimes

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Bibliographic details

• Authors: Alina Carare, Mark R. Stone
• Published: January 1, 2003
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451842616.001

Overview

• This paper classifies countries that define their monetary policy framework by an inflation target into full-fledged inflation targeters, eclectic inflation targeters and inflation targeting lite regimes.
• The classification is based on indicators of the clarity and credibility of the commitment to the inflation target.
• The three regimes can be viewed as corresponding to different welfare maximizing combinations of policy objectives, each conditional on a country's "endowed" level of credibility.

Key findings and analysis

• The credibility of the regimes is related empirically to structural differences.
• The classification distinguishes:
  • full-fledged inflation targeters
  • eclectic inflation targeters
  • inflation targeting lite regimes
• The three regimes correspond to different welfare-maximizing policy-objective combinations conditional on a country's endowed credibility.

Policy implications and recommendations

• Policy implications are drawn, especially for emerging market countries aiming at full-fledged inflation targeting.
• Emphasis on the role of clarity and credibility of the commitment to the inflation target when choosing or transitioning to a regime.

Subject coverage and keywords

• Subject: Banking, Emerging and frontier financial markets, Exchange rates, Financial markets, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Price stabilization, Prices
• Keywords: Africa, central bank, central bank description, central bank financing, EIT country, Emerging and frontier financial markets, Exchange rates, FFIT country, FFIT emerging market country, financing restriction, Global, inconsistency problem, Inflation, inflation target, inflation target classification, inflation targeting, inflation targeting central banks, inflation targeting monetary policy framework, inflation targeting objective, inflation variability, inflation-targeting credibility, Monetary policy framework, price stability, Price stabilization, regime switch, WP

Inflation Targeting Regimes — By Alina Carare, Mark R. Stone, January 1, 2003.

Content in this bundle

• Inflation Targeting Regimes - WP/03/9
  • Inflation Targeting Regimes - WP/03/9 (Markdown version)
  • Inflation Targeting Regimes - WP/03/9 (PDF)