Empirical Analysis of the Impact of Inflation Targeting on the Risk Premium

Krušković, Borivoje D.; Maričić, Tina

doi:10.2478/jcbtp-2014-0016

Cited by 3 publications

(3 citation statements)

References 4 publications

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“…The global financial cycle transforms the trilemma into a "dilemma" or an "irreconcilable duo": independent monetary policies are possible if and only if the capital account is managed. Krušković and Maričić (2014) examine how the adoption of inflation targeting affects the movement of the risk premium. The hypothesis they want to test is that the adoption of inflation targeting affects the reduction of the country risk premium by affecting the formation of a more stable macroeconomic environment through a more stable and predictable inflation rate in the medium and long term.…”

Section: Literature Reviewmentioning

confidence: 99%

Exchange Rate Targeting Versus Inflation Targeting: Empirical Analysis of the Impact on Employment and Economic Growth

Krušković¹

2020

Journal of Central Banking Theory and Practice

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This paper analyses the effects of two alternative monetary strategies (exchange rate targeting and inflation targeting) on economic growth and employment. On the panel of 18 countries for the period from 1996 to 2013, I tested the hypothesis that countries in exchange rate targeting have a higher rate of GDP growth and lower inflation rate. In order to test the impact of exchange rate policy on economic growth and prices, I applied dynamic panel two stepwise method of least squares (2SLS method) and they were evaluated by two independent regression equation. In order to allow the comparison of results related to exchange rate targeting, the effects of the introduction of inflation targeting in the unemployment rate were also estimated using the panel method two stepwise least squares (2SLS method). Results of empirical studies show that countries with inflation targeting have a lower rate of economic growth and higher unemployment.

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Section: Literature Reviewmentioning

confidence: 99%

Exchange Rate Targeting Versus Inflation Targeting: Empirical Analysis of the Impact on Employment and Economic Growth

Krušković¹

2020

Journal of Central Banking Theory and Practice

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“…Umar, Dahalan, and Aziz (2016) showed that the Reserve Bank of South Africa adopted inflation targeting framework and could boost the economy. Kruskovic and Maricic (2014) found that the adoption of inflation targeting affects the reduction of the country risk premium by making a more stable macroeconomic environment through a more stable and predictable inflation. Monadjemi and Lodewijks (2014) indicated that inflation targeting was effective prior to the financial crisis around the year of 2008, and a more flexible form of targeting may still be appropriate after the crisis.…”

Section: Existing Studies About Inflation Targetingmentioning

confidence: 99%

Has Adoption of Inflation Targeting Been Effective? Japanese Case

Kurihara

2018

IJAFS

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Inflation targeting has been adopted in many countries. The pros and cons of adopting this policy have been discussed in developing countries and in developed ones as the goal of this policy has been changing. For most developed economies, combating deflation has been a serious problem, so adopting inflation targeting for this overcoming deflation and recession is ongoing in many developed economies. This paper examines whether or not adoption of inflation targeting has been effective in Japan. Empirical results show that adoption of inflation targeting has promoted overcoming deflation, however, there are no clear results that other important macroeconomic variables have been related directly with this policy.<span style="font-family: 'Times New Roman','serif'; font-size: 11pt; mso-bidi-font-size: 10.0pt; mso-fareast-font-family: '?? ??'; mso-font-kerning: 1.0pt; mso-ansi-language: EN-US; mso-fareast-language: JA; mso-bidi-language: AR-SA;" lang="EN-US">

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“…The set of monetary instruments employment will always differ from country to country and region to region. However, while price stability is first and foremost the primary objective of monetary policy, [8] argues that exchange rate stability and the growth of output and employment should not be forgotten as part of the objectives of the monetary policy.…”

Section: Introductionmentioning

confidence: 99%

Trade Openness and Crude Oil Price Effects on Food Inflation: Examining the Romer Hypothesis in Kenya

Lidiema¹

2020

JWER

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Food Prices accounts for about 36% of the overall consumer price index in Kenya and it's the single largest of the 12 components that make up the index. Therefore, shocks in food prices could considerably be transmitted to the overall consumer price index. While Kenya agricultural production is heavily rain-fed, external pressures from and shocks from crude oil price, international trade are transmitted inwards and pile more pressure on food prices as well. While inflation tend to follow all the available information in the market and business per the rational expectations' theory, price factors are a key determinant of business cycles, because price stickiness tend to drive demand. Therefore, demand for food products could be driven by several market features including internal food prices, oil prices, productions and importation costs. The objective of this research was to analyze the effect of Trade openness on food inflation in Kenya with a view of establishing if Romer's hypothesis holds in Kenya. The second objective is to establish the effect of crude oil prices on food inflation in Kenya. The study employed Autoregressive Distributed Lag (ARDL) cointegrating technique to estimate both short-run and long run estimates. The study findings indicate that trade openness significantly has a reducing influence on food inflation hence confirming the existence of Romer's hypothesis in Kenya. Secondly, crude oil prices have a positive and significant effect on food inflation. Interestingly, the study found that money supply does not have significant influence on food inflation. The study recommends embracing and adopting international free trade agreements to further leverage on imports prices, increase buffer storage to cushion against food demand and hence stabilize food prices. Secondly the government should enhance further price controls on oil prices to reduce spillovers to food production and supply costs. In addition, Kenya should develop technologies to improve agricultural farm production to leverage dependence of rain-fed agricultural sector.

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Empirical Analysis of the Impact of Inflation Targeting on the Risk Premium

Cited by 3 publications

References 4 publications

Exchange Rate Targeting Versus Inflation Targeting: Empirical Analysis of the Impact on Employment and Economic Growth

Exchange Rate Targeting Versus Inflation Targeting: Empirical Analysis of the Impact on Employment and Economic Growth

Has Adoption of Inflation Targeting Been Effective? Japanese Case

Trade Openness and Crude Oil Price Effects on Food Inflation: Examining the Romer Hypothesis in Kenya

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