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On the Future of Inflation Targeting in E ast A sia
Author(s) -
Volz Ulrich
Publication year - 2015
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12173
Subject(s) - monetary policy , inflation targeting , economics , inflation (cosmology) , exchange rate , central bank , monetary economics , financial stability , keynesian economics , macroeconomics , financial system , physics , theoretical physics
This article analyzes the problems associated with inflation targeting ( IT ) regimes in a number of E ast A sian countries. It scrutinizes the policy conflicts that can arise when a central bank that has adopted a formal inflation target to guide the conduct of monetary policy simultaneously manages the exchange rate and pursues financial stability objectives. To this end, it empirically investigates the importance of exchange rate and terms of trade movements as determinants of inflation rates across E ast A sian economies and discusses the role of central banks in guarding financial stability and the ways this may conflict with an IT regime. The article argues that IT never really has been a suitable monetary framework for E ast A sian countries and that it should hence be supplanted by transparent monetary frameworks that explicitly recognize the multiple goals that are being pursued by E ast A sian central banks.