Inflation targeting at the crossroads: Evidence from post-communist economies during the crisis

Petreski, Marjan

doi:10.1016/j.postcomstud.2014.04.010

Cited by 8 publications

(4 citation statements)

References 48 publications

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“…Our results, from a sample of 73 countries over the period 1980-2012, indicate that the degree of CBC robustly explains banking sector vulnerability, which is in line with the benign neglect hypothesis. On this respect, if the inflation targeting (IT) framework implies a narrower focus on the inflation stabilization objective, our results are in line with papers concluding that IT has some adverse financial and real effects (Petreski, 2014;Frappa and Mésonnier, 2010;Lin, 2010).…”

Section: Introductionsupporting

confidence: 89%

Central banks’ preferences and banking sector vulnerability

Levieuge

Lucotte

Pradines-Jobet

2019

Journal of Financial Stability

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Section: Introductionsupporting

confidence: 89%

Central banks’ preferences and banking sector vulnerability

Levieuge

Lucotte

Pradines-Jobet

2019

Journal of Financial Stability

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“…This corresponds with the recent international evidence in favour of inflation targeting for both emerging and industrial economies, in the context of shock absorbing properties (Fratscher, Grosse-Steffen and Rieth, 2020), favourable conditions for capital inflows (Mollick, Torres and Carneiro, 2011), and stability of the banking system in countries with average quality of institutions (Fazio et al, 2018). However, there are empirical studies showing a very weak or non-existent support for inflation targeting (Petreski, 2014;Ryczkowski and Ręklewski, 2021). Among several disadvantages of inflation targeting, unfavourable output effects, inability to influence inflation expectations and ignorance of exchange rate levels are frequently mentioned (Ayres, Belasen and Kutan, 2014).…”

Section: Introductionsupporting

confidence: 83%

Inflation targeting, exchange rate and output gap in Central and Eastern European countries

Shevchuk,

Kopych

2024

Argumenta Oeconomica

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This paper aims at empirical assessment of monetary policy relationships in Central and Eastern European countries (Czechia, Hungary, Poland, Romania), which practise the monetary regime of inflation targeting. Using quarterly data for the period of 2004-2019, the authors examined the relationship between the output gap, nominal and real exchange rate misalignment, consumer price inflation and the central bank policy rate, using the panel vector autoregression (PVAR) model. According to estimates, the central banks of the CEE-4 countries react with an increase of their policy rate to the output gap and inflation, as implied by the Taylor rule. At the same time, a monetary reaction to nominal (real) exchange rate misalignment is lost in the estimates for the post-crisis period of 2010-2019. An increase of the central bank rates does not seem to have unfavourable output effects, while the nominal exchange rate is likely to depreciate with three to five quarter lags. However, there is evidence of the price puzzle when monetary tightening is followed by a counterintuitive increase in the inflation rate. In full accordance with the New Keynesian framework, inflation depends on the output gap, while being expansionary in the real sector. Evidence of the exchange rate pass-through (ERPT) to inflation is mixed. This article provides insights into the average monetary policy reaction function and its macroeconomic effects in the CEE-4 countries, with the value added in that following the Taylor rule does not guarantee effectiveness in tackling inflation in the presence of the price puzzle. Based on the estimated exchange rate effects on the output gap and inflation, deliberate currency appreciation resulting from the central bank foreign exchange interventions and/or fiscal austerity measures can be helpful for such a disinflation that minimises output losses.

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“…The Diffs-in-Diffs strategy and cross-country data from 1980 to 2007 were used to test this hypothesis (Abo-Zaid and Tuzemen 2012). According to Petreski (2014), during the economic crisis, inflation targeters perform better than non-targeters in terms of output growth. Moreover, Mollick et al (2011) employed a static panel data method to examine the effects of inflation targeting (IT) on output growth for the sample period of 1986-2004.…”

Section: The Recent Empirical Studiesmentioning

confidence: 99%

The Effect of Inflation Targeting (IT) Policy on the Inflation Uncertainty and Economic Growth in Selected African and European Countries

2022

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The study assessed the effect of inflation targeting (IT) policy on inflation uncertainty and economic growth in African and European IT countries. This study contributes to the existing knowledge by analysing and comparing the African IT and European IT countries using two advanced approaches which include the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) and Panel Vector Autoregressive (PVAR). To determine how the IT policy affects the inflation uncertainty in selected countries, time series techniques were employed. Panel data approaches were used to determine the effect of inflation targeting on economic growth in the selected countries. The results are as follows: (1) Inflation Targeting policy is insignificant in reducing inflation uncertainty in South Africa, and the effect of the policy in Ghana is inconclusive; (2) The IT policy has a significant impact in reducing inflation uncertainty in European countries (i.e., Poland and the Czech Republic); (3) Inflation targeting has a negative impact on economic growth in African Countries; (4) The policy has a positive impact on economic growth in European Countries; (5) In comparison to European countries, the strategy has a negligible impact on economic growth in Africa. Overall, the results suggest that European countries inflation targeting regimes are more credible in terms of reducing the level of inflation uncertainty and sustaining economic growth compared to African countries. In this respect, policymakers must ensure that they assess the economic condition of an individual country before implementing such a policy.

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Inflation targeting at the crossroads: Evidence from post-communist economies during the crisis

Cited by 8 publications

References 48 publications

Central banks’ preferences and banking sector vulnerability

Central banks’ preferences and banking sector vulnerability

Inflation targeting, exchange rate and output gap in Central and Eastern European countries

The Effect of Inflation Targeting (IT) Policy on the Inflation Uncertainty and Economic Growth in Selected African and European Countries

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