Inflation Targeting and Exchange Rate Regimes in Emerging Markets
IMF Working Papers, October 28, 2015
Source details
- Canonical URL
- Inflation Targeting and Exchange Rate Regimes in Emerging Markets
Other formats
Bibliographic details
- Authors: Christian H Ebeke, Armand P Fouejieu
- Published: October 28, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513586267.001
Overview
- Title: Inflation Targeting and Exchange Rate Regimes in Emerging Markets
- Authors: Christian H Ebeke, Armand P Fouejieu
- Publication date: October 28, 2015
- Scope: Investigates the effects of the adoption of inflation targeting (IT) on the choice of exchange rate regime in emerging markets (EMs), conditional on certain macroeconomic conditions.
- Main methodological note from source: Uses a large sample of EMs and controls for the selection bias associated with the adoption of IT.
Key findings
- On average, IT countries have a relatively more flexible exchange rate regime than other EMs.
- The flexibility of the exchange rate regime shows strong heterogeneity among IT countries depending on:
- their degree of openness, and
- exposure to FX risks.
- The marginal effect of IT adoption on exchange rate flexibility:
- increases with the duration of the IT regime in place, and
- increases with the propensity scores to adopt IT.
Heterogeneity and conditional results
- Heterogeneity in exchange rate flexibility across IT adopters is linked to:
- degree of openness, and
- exposure to foreign exchange (FX) risks.
- Conditional factors (duration of IT, propensity scores) modify the marginal impact of IT adoption on exchange rate flexibility.
Methodology and sample (as described)
- Sample: large sample of emerging markets (EMs).
- Estimation approach: controls for selection bias associated with the adoption of IT.