Credibility and Monetary Policy under Inflation Targeting

Aguir, Abdelkader; Ghrissi, Mhamdi; Farhani, Ramzi

doi:10.18488/journal.62/2015.2.3/68.3.78.90

Cited by 3 publications

(5 citation statements)

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“…The implementation of an inflation targeting regime helps mitigate the lack of confidence that monetary authorities now inspire economic agents and in fact will strengthen the central bank's credibility in the conduct of monetary policy. 1 A survey carried out by the IMF (2010) with a wide range of central banks, no fewer than thirtythree emerging countries would have expressed the wish to adopt a strategy of inflation targeting in the longer term, seeking for the most part technical assistance from this international institution. These countries were Costa Rica, Egypt and Ukraine, with a maturity of 1 to 2 years; Albania, Angola, Armenia, Azerbaijan, Botswana, Georgia, Morocco, Mauritius, Uganda, Pakistan, Paraguay, the Dominican Republic and the Republic of Guinea with a deadline of 3 at 5 ; Belarus, Bolivia, China, Honduras, Kenya, Kyrgyzstan, Moldova, Nigeria, Papua New Guinea, Serbia, Sudan, Sri Lanka, Tunisia, Uruguay, Venezuela, Vietnam and Zambia with a maturity of more than 5 years.…”

Section: Credibility Of the Monetary Authoritymentioning

confidence: 99%

“…In addition, the results of empirical studies (Ball and Sheridan (2005), Batini and Laxton (2007), Gonçalves and Salles (2008), Lin and Ye (2012), Ayres & al (2014), Aguir and Smida (2015)) demonstrate that inflation targeting acts optimally on macroeconomic performance in developing and emerging countries that target inflation in terms of reduced level and volatility of inflation and output growth. Even in the face of shocks generated by the latest economic and financial crisis, central banks that target inflation have responded better than other banks.…”

Section: Introductionmentioning

confidence: 99%

“…These results have prompted many other emerging countries to adopt this targeting strategy as a monetary policy management system 1 , where the monetary authorities continue to make considerable progress in the conduct of the monetary policy of inflation. However, before adopting inflation targeting policy, it is important to fulfil the institutional and structural prerequisites for its implementation.…”

Section: Introductionmentioning

confidence: 99%

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Central Bank Credibility, Independence, and Monetary Policy

Aguir

2018

Journal of Central Banking Theory and Practice

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The main motives behind the adoption of an inflation targeting regime largely relate to the notion of credibility, transparency of monetary policy and the autonomy of the central bank, which explicitly undertakes to achieve a certain inflation target. This paper examines the effects of inflation targeting in emerging economies in relation to the degree of independence of the central bank and the credibility of monetary policy. We find effects in emerging economies with little central bank independence, so our findings suggest that the central bank’s credibility, transparency and independence is a prerequisite for emerging economies to experience a decline in inflation following the adoption of inflation targeting.

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Section: Credibility Of the Monetary Authoritymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Central Bank Credibility, Independence, and Monetary Policy

Aguir

2018

Journal of Central Banking Theory and Practice

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“…In recent investigations, researchers have come up with better ways of dealing with these three puzzles and most of which is fashioned after the framework set by Lucas (1972) where rational expectation approach to the monetary policy study was recommended. Recent studies that have adopted the same approach include (Cochrane, 1998;Kahn et al, 2002;Zhang, 2009;Hsing, 2014;Aguir et al, 2015;Edeme and Obiayo, 2017;Adjei, 2018;Taguchi and Wanasilp, 2018) to mention but a few.…”

Section: Literature Reviewmentioning

confidence: 99%

Efficacy of Monetary Policy Instruments on Economic Growth: Evidence from Nigeria

Tule¹,

Ogundele²,

Apinran³

2018

Asian Economic and Financial Review

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The inability of monetary policies to efficiently and effectively exploit its policy objective could be a function of the pitfall of policy instruments adopted which seems to restrict its contributions to economic advancement in Nigeria. It is on this premise that this study investigated the efficacy of monetary policy instruments in Nigeria using monthly data from year 2000 to 2016. The study adopted the Johansen Multivariate Cointegration approach and Vector Error Correction (VECM). The Cointegration test established existence of long-term relationship between monetary policy instruments and economic growth. The study also revealed that there was monthly speed of adjustment of the variables towards their long-run equilibrium path to about 27 percent. The key discovery emanated from this study indicated that Consumer Price Index (CPI), Real Exchange Rate (RER), Money Supply (M2) and Interest Rate (INT) were significant monetary policy instruments that propelled economic growth in Nigeria during the period under review. Consequently, the study concluded by recommending Nominal GDP targeting as the framework to be adopted by the monetary authority in Nigeria in their monetary policy making process especially in the face of the new economic paradigm which is expected to be more plausible in improving and sustaining the stated Nigerian macroeconomic objectives. Contribution/ Originality: This study differs from others in examining the subject matter with high frequency data as against traditional annual data which has proved to be more efficient and captures more the effect of time, and the very first with such logical conclusion and recommendation for policy makers.

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“…Aguir & Smida (2015) found that the implementation of the ITF can raise the credibility of the monetary authority. Their study indicates the ITF regime is conducive to sustainable economic growth and the inflation targeting countries recognize more macroeconomic performance as its neighbour of not targeting and that these differences are generally attributable to the choice of this new regime.…”

Section: Introductionmentioning

confidence: 99%

Measurement of the efficiency of monetary policy in Indonesia

Purwanda¹,

Rochana²

2017

Econ. J. Emerg. Mark.

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Since 2000, monetary policy in Indonesia started to use Inflation Targeting Framework (ITF). To evaluate the performance of the monetary policy, it requires efficiency indicators. The measurement of the efficiency of monetary policy is based on inflation and output variations. This paper formulates a method for measuring the efficiency of monetary policy and applies it in Indonesia. It finds that since the implementation of ITF, the efficiency of monetary policy has not changed significantly. However, the efficiency of monetary policy tends to increase after the full implementation of the ITF framework after 2005 than in the transition period of 2000-2005. AbstrakSejak tahun 2000 kebijakan moneter di Indonesia mulai menggunakan Inflation Targeting Framework (ITF). Untuk mengevaluasi kinerja kebijakan moneter, diperlukan indikator efisiensi. Pengukuran efisiensi kebijakan moneter didasarkan pada variasi inflasi dan output. Makalah ini merumuskan metode untuk mengukur efisiensi kebijakan moneter dan menerapkannya di Indonesia. Penelitian ini menemukan bahwa sejak implementasi ITF, efisiensi kebijakan moneter tidak berubah secara signifikan. Namun, efisiensi kebijakan moneter cenderung meningkat setelah implementasi penuh kerangka kerja ITF setelah tahun 2005 dibandingkan dengan periode transisi 2000-2005.

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Credibility and Monetary Policy under Inflation Targeting

Abstract: After more than two decades of inflation targeting in the world, it is important to evaluate if the adoption of this regime in a relevant

Cited by 3 publications

References 45 publications

Central Bank Credibility, Independence, and Monetary Policy

Central Bank Credibility, Independence, and Monetary Policy

Efficacy of Monetary Policy Instruments on Economic Growth: Evidence from Nigeria

Measurement of the efficiency of monetary policy in Indonesia

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