{
  "title": "Balance of Payments Crises Under Inflation Targeting",
  "publication": "IMF Working Papers, April 1, 2007",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/balance-of-payments-crises-under-inflation-targeting-20532",
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  "summary": "This paper analyzes a small open economy model under inflation targeting. It shows why such a monetary regime is vulnerable to speculative attacks that take place over a short period rather than instantaneously.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Title: Balance of Payments Crises Under Inflation Targeting\n- Authors: Shujing Li, Isabel K. Yan, Michael Kumhof\n- Date: April 1, 2007\n- Series: Working Paper No. 2007/084\n- Issue: 084\n- Volume: 2007\n- Pages: 26\n- DOI: https://doi.org/10.5089/9781451866483.001\n- ISBN: 9781451866483\n- ISSN: 1018-5941\n- Abstract summary: The paper analyzes a small open economy model under inflation targeting and shows why such a monetary regime is vulnerable to speculative attacks that take place over a short period rather than instantaneously."
    },
    {
      "heading": "Key findings",
      "content": "- Vulnerability to attacks:\n  - Inflation-targeting regimes are vulnerable to speculative attacks that unfold over a short period rather than instantaneously.\n- Determinants of collapse speed and reserve losses:\n  - The speed at which the regime collapses, and the extent of reserve losses, are increasing in the central bank's explicit or implicit commitment to intervene in the foreign exchange market.\n- Ranking of attack severity (from most to least severe):\n  - Exchange rate targeting\n  - CPI inflation targeting\n  - Domestic nontradables inflation targeting\n  - Money targeting\n- Role of consumption composition:\n  - Under inflation targeting, the size of the attack is increasing in the tradables consumption share."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Consumption, Demand for money, Exchange rates, Inflation, Inflation targeting\n- Keywords: rate of exchange, WP"
    },
    {
      "heading": "Publication and access notes",
      "content": "- Working Papers series: IMF Working Papers\n- Citation format provided: Chicago — Shujing Li, Isabel K. Yan, and Michael Kumhof. \"Balance of Payments Crises Under Inflation Targeting\", IMF Working Papers 2007, 084 (2007), accessed 9/17/2026, https://doi.org/10.5089/9781451866483.001\n\nIMF Working Paper No. 2007/084, April 1, 2007, by Shujing Li, Isabel K. Yan, Michael Kumhof.\n\n---\n\n Content in this bundle\n\n- 4.   Brazil 2001\n  - 4.   Brazil 2001 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 4.   Brazil 2001 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/balance-of-payments-crises-under-inflation-targeting-20532"
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    "Authors: Shujing Li, Isabel K. Yan, Michael Kumhof",
    "Published: April 1, 2007",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451866483.001",
    "Title: Balance of Payments Crises Under Inflation Targeting",
    "Authors: Shujing Li, Isabel K. Yan, Michael Kumhof",
    "Date: April 1, 2007",
    "Series: Working Paper No. 2007/084",
    "Issue: 084",
    "Volume: 2007",
    "Pages: 26",
    "DOI: https://doi.org/10.5089/9781451866483.001",
    "ISBN: 9781451866483",
    "ISSN: 1018-5941",
    "Abstract summary: The paper analyzes a small open economy model under inflation targeting and shows why such a monetary regime is vulnerable to speculative attacks that take place over a short period rather than instantaneously.",
    "Vulnerability to attacks:",
    "Determinants of collapse speed and reserve losses:",
    "Ranking of attack severity (from most to least severe):",
    "Role of consumption composition:",
    "Subject: Consumption, Demand for money, Exchange rates, Inflation, Inflation targeting",
    "Keywords: rate of exchange, WP",
    "Working Papers series: IMF Working Papers",
    "Citation format provided: Chicago — Shujing Li, Isabel K. Yan, and Michael Kumhof. \"Balance of Payments Crises Under Inflation Targeting\", IMF Working Papers 2007, 084 (2007), accessed 9/17/2026, https://doi.org/10.5089/9781451866483.001",
    "**4.   Brazil 2001**"
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