Modalities of Moving to Inflation Targeting in Armenia and Georgia
June 1, 2007
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Summary
This paper reviews the current monetary and exchange rate policy frameworks in Armenia and Georgia, and the challenges associated with the choice of a credible nominal anchor in the context of large nominal and real shocks. The paper makes a case for a gradual transition to full-fledged inflation targeting (FFIT) in both countries in the medium term. The implications of this option are examined from various angles. In particular, the monetary transmission mechanisms and compliance with major institutional prerequisites for successful FFIT adoption are analyzed. Based on this analysis, the paper identifies a series of short- and medium-term recommendations, drawing on the experience of emerging market countries that successfully moved to FFIT.
Subject: Banking, Consumer price indexes, Exchange rate pass-through, Exchange rates, Inflation
Keywords: Armenia, central bank, country, exchange rate, Georgia, WP
Pages:
36
Volume:
2007
DOI:
Issue:
133
Series:
Working Paper No. 2007/133
Stock No:
WPIEA2007133
ISBN:
9781451866971
ISSN:
1018-5941
