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IMF Staff Papers Logo    Last updated:September 2002
Volume 49, Number 3
Inflation Targeting in the Context of IMF-Supported Adjustment Programs
Mario I. Blejer, Alfredo M. Leone, Pau Rabanal, and Gerd Schwartz

Full Text of this Article (PDF 120K)

Abstract: This paper argues that the IMF's traditional monetary conditionality—a ceiling on net domestic assets of the central bank and a floor on its net international reserves—should be adapted in IMF-supported adjustment programs with countries that have a framework of explicit inflation targets for the implementation of monetary policy. This adaptation should aim at enhancing correspondence and consistency between the monetary objectives of the central bank and the targets established under the IMF-supported adjustment program, as well as between the different instruments used to achieve the policy objectives and targets. The paper reviews various general options in this regard, and, using the case of Brazil as an example, demonstrates how these options may be implemented in practice. .
[JEL E52, E31, E17]