what to target inflation or exchange rate author affiliation shu lin shulin75 gmail comhaichun ye haichunye gmail com acknowledgment the authors would like to thank kent kimbrough and two anonymous referees for valuable comments 1 introductionone of the most important recent innovations in the conduct of monetary policy is inflation targeting in which a monetary authority makes public an estimated inflation rate or range and attempts to steer the actual inflation toward the target using monetary tools since its emergence in the early 1990s inflation targeting has certainly been gaining popularity over the last two decades by the end of 2006 27 countries among which 17 are developing countries had explicitly adopted this new monetary policy regime the emergence of inflation targeting has attracted substantial attention from both researchers and policymakers numerous studies have empirically evaluated the effects of adopting an explicit inflation targeting regime on a country s economic performance especially on inflation and growth while studies focusing on advanced industrial countries so far have yielded mixed results the evidence in developing countries seems to be more robust 1 batini kuttner and laxton 2005 goncalves and salles 2008 and lin and ye 2009 all find that inflation targeting significantly lowers inflation in developing countries where the credibility of the central bank has not yet been well established thus the credibility gain of adopting an explicit inflation targeting regime is substantial in addition capistran and ramos francia 2010 show that inflation targeting significantly lowers the dispersion of inflation expectations in developing countries two recent survey articles walsh 2009 and ball 2010 also concluded that inflation targeting has larger beneficial effects in developing countries than those in advanced industrial countries despite the success of inflation targeting in developing countries the more traditional exchange rate targeting framework still remains the dominant monetary policy regime in developing countries it is so popular that an influential study by calvo and reinhart 2002 finds an epidemic case of fear of floating in the developing world 2 furthermore similar to inflation targeting an exchange rate targeting regime especially a credibly enforced one is also viewed as an effective means to achieve price stability in developing countries because it serves as a nominal anchor by allowing a developing central bank to borrow credibility from a foreign monetary authority in a strict exchange rate targeting framework the targeting country s inflation rate should be equal to that of the country usually a low inflation rich country to which its exchange rate is pegged does an inflation targeting framework outperform an exchange rate targeting regime in achieving price stability in developing countries if so does this benefit come at a cost of slower growth these two important and policy related questions have not yet been examined in the literature a common feature of previous studies is that they all compare an inflation targeting regime with a very broad alternative namely a non inflation targeting regime while ignoring the substantial heterogeneity in the monetary policy regimes adopted by non inflation targeting countries a disadvantage of comparing inflation targeting with such a broad alternative is that the results may not be of direct use for policy choices the objective of this study therefore is to make the first attempt in the literature to conduct a direct empirical comparison of the emerging inflation targeting framework with the popular exchange rate targeting regime in developing countries in particular we compare the effects of these two monetary policy regimes on two key outcome variables inflation and economic growth our study is built upon three recent empirical works on the effects of inflation targeting in developing countries including batini kuttner and laxton 2005 goncalves and salles 2008 and lin and ye 2009 but we focus on directly comparing inflation targeting with exchange rate targeting

the effect of inflation targeting on the behavior of expected inflation evidence from an 11 country panel abstract inflation targets were introduced in the 1990s in australia canada new zealand sweden and the united kingdom change in the behavior of expected inflation in the five targeting countries is measured in a panel that includes six non targeting countries france germany italy the netherlands japan and the united states the level of expected inflation in targeting countries falls after the announcement of targets with controls for country effects year effects ongoing inflation reduction and the business cycle neither the variability of expected inflation nor the average absolute forecast error falls after the announcement of targets with controls for the level and variability of past inflation both targeting and non targeting countries experience unexpected disinflation

does inflation targeting improve fiscal discipline abstract we explore the performances of inflation targeting it adoption in terms of fiscal discipline fd while most existing studies focus exclusively on the role of fd as a precondition for it adoption using a sample of developing and developed countries we show that it adoption exerts a positive and significant effect on fd a result robust to a wide variety of alternative specifications in addition this effect is statistically significant only in developing countries a result that may fuel the current debate regarding the relevance of it adoption in general and particularly for developing countries

asymmetric loss and herding behaviour of exchange rate forecasters evidence from south africa this study examines the asymmetry of the loss function for private forecasters in exchange rate forecasts of the south african rand it tests rationality under the possibility of an asymmetric loss function the results indicate less evidence of asymmetry for a horizon of 1 month but considerable evidence of asymmetry for a horizon of 3 months however the shapes of the distributions formed by estimated asymmetry parameters of sub samples for each forecaster are symmetric regardless of the forecast horizons which implies that these forecasters do not herd or antiherd in fact the results of our empirical herding test show that forecasters neither herd nor antiherd which is in sharp contrast to recent findings on antiherding for foreign exchange rates in emerging market economies our findings provide consistent evidence for a recent suggestion that antiherding might result in the rejection of rationality even under asymmetric loss functions our findings also suggest that central bank transparency m

monetary policy strategies for latin america the authors examine possible monetary policy strategies for latin america that may help lock in the gains the region attained in the fight against inflation in the 1990s instead of focusing the debate about the conduct of monetary policy on whether the nominal exchange rate should be fixed or flexible the focus should be on whether the monetary policy regime appropriately constrains discretion in monetary policymaking three basic frameworks deserve serious discussion as possible long run strategies for monetary policy in latin america the authors examine the advantages and disadvantages of a hard exchange rate peg monetary targeting and inflation targeting in light of monetary policy s recent track record in several latin american countries looking for clues about which of the strategies might be best suited to economies in the region the answer it depends on the country s institutional environment some countries appear not to have the institutions to constrain monetary policy if discretion is allowed in those countries there is a strong argument for hard pegs including full dollarization that allow little or no discretion to monetary authorities in countries such as chile which can constrain discretion inflation targeting is likely to produce a monetary policy that keeps inflation low yet appropriately copes with domestic and foreign shocks monetary targeting as a strategy for latin america is not viable because of the likely instability of the relationship between inflation and monetary aggregates of which there is ample international evidence no monetary strategy can solve the basic problems that have existed in latin american economies for a long time the authors welcome the recent move in latin american countries toward inflation targeting but say no policy will succeed unless government policies also create the right institutional environment

inflation targeting and inflation performance a comparative analysis this article examines how the impact of inflation targeting on inflation performance depends on the choice of country samples adoption dates time periods and methodological approaches we apply two different estimation methods difference in differences and propensity score matching for our sample of 25 advanced and 59 emerging and developing countries over the period 1985 to 2011 our findings suggest that distinguishing countries by economic development is crucial as no effect of inflation targeting is found for advanced economies whereas the results suggest a significant negative effect of inflation targeting on inflation in emerging and developing countries the results are robust to the methodology used for the analysis

gender differences in firm performance evidence from new ventures in the united states abstract prior studies examining the performance of female and male owned firms have generally reported that female owned firms underperform male owned firms however it is conceivable that the performance measures used by previous studies and or their inability to control for key demographic differences may have contributed to this finding for example few studies use size adjusted performance measures and yet we know that female owned firms tend to be smaller than their male counterparts similarly risk is typically not considered even though evidence suggests that women tend to be more risk averse than men we use a longitudinal five year database of more than 4000 new ventures that began operations in the u s in 2004 to determine whether potential differences in the performances of female and male owned firms disappear when appropriate performance measures are used and important demographic differences are controlled for in the models the performance measures we examine include 4 year closure rates return on assets roa and a risk adjusted measure sharpe ratio univariate test results confirm our expectation based on both liberal and social feminist theory that there is no difference in the performance of female and male owned new ventures provided performance is appropriately measured further these results are supported by our multivariate analyses which control for demographic differences such as industry experience and hours worked our findings should be of interest to researchers financiers advisors and policy makers perhaps more importantly our findings should also ensure that women who are contemplating starting a new venture are not discouraged from doing so by a false belief that new ventures initiated by women are less likely to succeed than those initiated by men

filling the poverty gap multiple transfer program participation ata from the 1979 income survey development program are used to describe multiple transfer program participation and its effect on the poverty rate and the poverty gap of 87 1 million u s families and unrelated individuals 40 percent received some government transfer in april 1979 further more than 80 percent of pretransfer poor families received some transfer the benefits received by the elderly succeeded in reducing their poverty rate from 68 to 10 percent and reducing their poverty gap by 96 percent in contrast government transfers reduced the poverty rate for single parent families from a pretransfer rate of 48 percent to a posttransfer rate of 30 percent an examination of target efficiency indicates that 82 percent of all income conditioned transfers go to the pretransfer poor

inflation targeting as a shock absorber abstract we study the characteristics of inflation targeting as a shock absorber using quarterly data for a large panel of countries to overcome an endogeneity problem between monetary regimes and the likelihood of crises we propose to study large natural disasters we find that inflation targeting improves macroeconomic performance following such exogenous shocks it lowers inflation raises output growth and reduces inflation variability compared to alternative monetary regimes this performance is mostly due to a different response of monetary policy and fiscal policy under inflation targeting finally we show that only hard but not soft targeting reaps the rewards deeds not words matter for successful monetary stabilization

bond markets initiation and tax revenue mobilization in developing countries we analyze the relationship between the introduction of a sovereign bond market bm and tax revenue mobilization behavior using a large sample of 119 developing countries propensity scores matching estimations reveal that bm participation significantly fosters domestic tax revenue mobilization moreover we find that this favorable effect is sensitive to bm countries characteristics namely the stance of monetary and fiscal policies the exchange rate regime the level of economic development and the degree of financial openness and financial development finally our results show that bm participation fosters internal taxes and reduces their instability compared to international trade taxes these findings highlight the strength of bm in promoting structural reforms in developing countries through encouraging them to increase their tax effort and even by contributing to some extent to the fiscal transition process

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed

does inflation targeting help reduce financial dollarization we examine whether adopting an inflation targeting regime helps reduce financial dollarization as predicted by ize and levy yeyati s 2003 portfolio model to address the self selection problem of policy adoption we apply a variety of propensity score matching methods to a large sample of 106 developing countries for the years 1985 2004 we find strong evidence that inflation targeting has large and significant treatment effects on lowering both actual financial dollarization and the model implied minimum variance portfolio dollarization our results are robust to alternative samples and model specifications and also to control for additional factors in postmatching regressions

transitions at different moments in time a spatial probit approach this paper adopts a spatial probit approach to explain interaction effects among cross sectional units when the dependent variable takes the form of a binary response variable and transitions from state 0 to 1 occur at different moments in time the model has two spatially lagged variables one for units that are still in state 0 and one for units that had already transferred to state 1 the parameters are estimated on observations for those units that are still in state 0 at the start of the different time periods whereas observations on units after they transferred to state 1 are discarded just as in the literature on duration modeling furthermore neighboring units that had not yet transferred may have a different impact from units that had already transferred we illustrate our approach with an empirical study of the adoption of inflation targeting for a sample of 58 countries over the period 1985 2008 copyright 2016 john wiley sons ltd

flexible inflation targets forex interventions and exchange rate volatility in emerging countries abstract emerging economies with inflation targets it face a dilemma between fulfilling the theoretical conditions of strict it which imply a fully flexible exchange rate or applying a flexible it which entails a de facto managed floating exchange rate with foreign exchange forex interventions to moderate exchange rate volatility using a panel data model for 37 countries we find that although it lead to higher exchange rate instability than alternative regimes forex interventions in some it countries have been more effective to lower volatility than in non it countries which may justify the use of flexible it by policymakers

inflation forecast targeting implementing and monitoring inflation targets abstract inflation targeting is shown to imply inflation forecast targeting the central bank s inflation forecast becomes an explicit intermediate target inflation forecast targeting simplifies both implementation and monitoring of monetary policy the weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target money growth or exchange rate targeting is generally inferior than inflation targeting and leads to higher inflation variability commitment to target rules may be better than commitment to instrument rules

inflation targeting and relative price variability what difference does inflation targeting make author affiliation chi young choi cychoi uta eduyoung se kim acknowledgment the authors are grateful to coeditor kent kimbrough and two anonymous referees for constructive comments that helped to improve this article the authors also wish to thank steve cecchetti kang liu shin ichi nishiyama margie tieslau taka tsuruga and the seminar participants at the academia sinica national chung cheng university national sun yat sen university national taiwan university texas tech university and the university of texas at arlington for helpful comments and vikas kakkar for providing cpi data for hong kong any remaining errors are the authors 1 introductionvariability in relative prices is known to be a major channel through which inflation can induce welfare costs by impeding an efficient allocation of resources in the economy consequently substantial effort has been devoted in the literature to examining the link between relative price variability rpv and aggregate inflation although much of the existing theoretical and empirical literature points to a positive monotonic relationship newer contributions suggest that the relationship between inflation and rpv is more complicated particularly in terms of its sensitivity to the inflation regime 1the primary purpose of this study is to investigate whether the connection between inflation and rpv is influenced in an important way by the monetary policy framework chosen by a central bank specifically this article focuses on exploring whether the adoption of an inflation targeting it framework exerts any significant impact on rpv as measured by the standard deviations of sectoral inflation rates relative to the aggregate rate since it was first implemented in new zealand more than two decades ago the popularity of it has spread with some twenty five countries worldwide implementing the framework to date freedman and laxton 2009 the literature is now replete with studies pointing to reductions in both the level and the volatility of inflation in countries that have adopted it e g mishkin and schmidt hebbel 2007 2 while studies of the impact of it on aggregate inflation performance are plentiful little attention has been paid to the impact of it on rpv the question of whether and indeed how it affects rpv is an important one for several reasons first exploring the potential connection between it and rpv is a worthwhile exercise given the popularity of it as a monetary framework and the centrality of rpv to the current generation of macromodels the importance of rpv is recognized in standard new keynesian dynamic stochastic general equilibrium dsge models where the variance of relative prices is viewed as a useful summary statistic as noted by amano ambler and rebei 2007 for example in dsge models the optimal rate of target inflation and the optimal variability of inflation relative to output depend on the quantitative effects of price dispersion on macroeconomic equilibrium second answering the question helps us identify the driving force behind the change in rpv distinguishing between it adoption itself and its subsequent impact on inflation if the relationship is monotonically positive as is often believed in the literature one should expect that it adoption would bring about a decline in rpv in the same way as it has led to a decline in inflation if the relationship is more complex however the effect of it adoption on reducing rpv may hinge on the change in inflation regimes after it adoption third our answer to the question also sheds additional light on the empirical evidence for the relative effectiveness of it across different stages of development while there is strong evidence that developing countries benefit more from it than industrial countries in combating inflation and its volatility e g petursson 2004 lin and ye 2009 we are aware of no empirical research that has assessed this issue with respect to rpv

dealing with time inconsistency inflation targeting versus exchange rate targeting adopting a single instead of multiple targets can be an effective way to overcome the classic time inconsistency problem the choice of a single mandate depends on the trade openness and the credibility reduced form empirical results show as central banks become less credible they are more likely to adopt a pegged exchange rate and the tendency to peg depends on trade openness in a model with loose commitment as credibility falls either an inflation target or a pegged exchange rate is more likely to be adopted arelatively closed highly open economywould adopt an inflation target exchange rate peg

inflation targeting in latin america toward a monetary union this paper examines how monetary policy decisions in brazil regarding short term interest rates have affected the term structure of interest rates we apply an event study methodology in two distinct periods between january 2000 and august 2003 right after the implementation of the inflation targeting in brazil and between september 2003 and july 2008 the main results are 1 the surprise effects have decreased 2 the explanation power has increased in the second period indicating enhancement of monetary policy 3 market participants adjust their expectations with greater advance 4 the surprise effects of decisions on short term rates on the term structure of interest rates are now close to those found in the usa and germany but higher to those found in the uk and italy therefore the results indicate that fixed income market expectations are better adjusted to the central bank anti inflationary policy

the effect of inflation targeting and financial openness on currency composition of sovereign international debt abstract this paper analyzes the joint effect of inflation targeting and capital account openness in promoting changes to the currency composition of sovereign international debt in developing countries first using difference in differences in combination with entropy balancing we offer empirical evidence that the adoption of inflation targeting together with high capital account openness can significantly reduce the reliance on foreign currency denominated sovereign international debt we find that financially integrated inflation targeting countries have 11 percentage points lower foreign currency shares in their sovereign debt compared to non targeting countries second we determine the threshold level of financial openness that countries need to attain before they see the full benefits of inflation targeting third the joint effect of inflation targeting and capital account openness significantly increases three years after the policy implementation our results are robust to alternative specifications which include instrumental variables to account for the endogeneity of the policy

tagging and taxing the optimal use of categorical and income information in designing tax transfer schemes this paper explores aspects of the optimal design of tax transfer schemes that involve elements of both tagging the use of categorical benefits and means testing income relation of benefits simulations suggest a striking qualitative dissimilarity between the group specific schedules optimally imposed on poorer and richer groups broadly speaking the optimal marginal tax rate is decreasing in income among the latter but increasing among the former this latter observation potentially important for policy runs counter to the conventional wisdom from previous simulations the reconciliation we argue lies in the role played in optimal tax design by the revenue constraint

the impact of central bank independence on the performance of inflation targeting regimes abstract this paper examines the effects of inflation targeting on inflation in both advanced and emerging economies we do not detect significant effects in advanced economies and only find small benefits in emerging economies in line with previous studies however when we differentiate the impact of inflation targeting based on the degree of central bank independence we find large effects in emerging economies with low central bank independence our results therefore suggest that central bank independence is not a prerequisite for countries to experience significant declines in inflation following the adoption of inflation targeting furthermore we provide evidence that one channel through which inflation targeting lowers inflation more in countries with low central bank independence is the reduction of budget deficits following the adoption of an inflation target

inflation targeting fiscal rules and the policy mix cross effects and interactions we examine how inflation targeting it and fiscal rules fr affect inflation and fiscal performance in a large panel of countries during 1990 2009 in line with theory both fr and it appear to shape monetary and fiscal outcomes significant cross effects seem to exist as it strengthens fiscal performance whereas the combination of fr and it tends to be associated with more disciplined macroeconomic policies than if only one of these institutions operates our findings suggest that it and fr affect the coordination of the policy mix and point to potential benefits of reforming macroeconomic frameworks in a holistic fashion

does the exchange rate regime make a difference in inflation performance in developing and emerging countries the role of inflation targeting abstract we apply propensity score matching estimators with multiple outcomes to evaluate the impacts of exchange rate regimes fixed intermediate and flexible without inflation targeting and inflation targeting on inflation rates in emerging and developing countries an inflation targeting regime does better than or at least as good work as a fixed regime in lowering inflation rates when compared with intermediate or flexible regimes we do not observe a clear difference in inflation rates between fixed and inflation targeting regimes in recent years 2000 2007 intermediate and flexible regimes provide higher inflation than fixed or inflation targeting regimes in most cases

labour supply incentives and the taxation of family income taxing family income richard blundell and ian walker will lower marginal rates of income tax increase incentives to work the traditional theoretical argument ignores the fact that many individuals are members of households with more than one potential participant in paid employment the theory of optimal income tax is utilized to argue that the tax system should discriminate between individuals in the same household if their labour supply responses are different empirically the response of labour supply to changes in after tax wages is largest for secondary workers particularly married women hence the largest beneficial incentive effect is obtained if such individuals face lower tax rates since these individuals typically have below average pre tax earnings this suggests a simple way to implement our proposal establish a progressive income tax with individual earnings as the basis of assessment this might have additional advantages of fairness but its primary purpose would be to ensure that low earning but highly responsive individuals face low marginal tax rates while high earning but relatively unresponsive individuals face higher marginal tax rates contrary to popular wisdom a flat rate tax system would be less favourable for work incentives we illustrate this theoretical argument using an empirical model of labour supply embedded in a micro computer programme capable of simulating alternative tax systems

making the most of high inflation this article examines the relationship between the real effects of inflation and its level in countries with frequent episodes of high inflation the real effects are computed as asymmetric impulse responses of output to inflation separately in the regimes with different signs of the differences between the expected inflation and the predicted output neutral inflation it is found that with the increase in inflation such effects increase in the regime with the positive sign relatively to the effects in the regime with the negative sign it is also shown that this finding is valid for most countries with high inflation episodes where inflation is greater than 4 8 for at least 25 of quarterly observations this leads to a simple policy prescription that in economies with frequent high inflation episodes anti inflationary monetary decisions are least damaging for output if undertaken in the periods when the difference between the expected and output neutral inflation is negative

labor supply and targeting in poverty alleviation programs the introduction of variable labor supply raises some fundamental issues in analyzing the targeting of poverty alleviation programs in developing countries it forces a reconsideration of the standard objective function which is based on income or expenditure and so makes no allowance for the effort made in earning that income the authors show that alternative views on the appropriate valuation of effort have very different implications for commodity based targeting rules they also establish a benchmark for marginal effective tax rates inclusive of benefit withdrawal in income tested schemes and show that indicator targeting rules may also have to be modified significantly when labor supply responses are recognized

optimally uniform commodity taxes taste differences and lump sum grants abstract optimal commodity taxes for an economy with many households should be at a uniform proportional rate under certain conditions these include i linear and parallel engel curves with intercepts dependent on household composition ii separability between goods and labour and iii optimal demogrants

inflation targeting and output inflation tradeoffs abstract this article assesses whether the adoption of inflation targeting it helps reduce the output inflation tradeoff we address the self selection problem of it policy adoption by the endogenous switching regressions and show that the output inflation tradeoffs are significantly lower in it countries not only over the whole sample but also across the developed and developing country subsamples in addition we also find strong evidence supporting the positive selection hypothesis i e countries have higher probability of adopting it are exactly those who benefit more larger reduction of output inflation tradeoff from the implementation of it additional results reveal that economies with higher trade openness lower financial openness and less flexible exchange rate regime are associated with larger tradeoff between output and inflation but the effects are only statistically significant in the it regime

optimal subsidy for the poor abstract this paper considers the problem of allocating an antipoverty budget subsidy among the poor in a society in an optimal and inequality reducing manner optimality requires minimization of some exogenously given poverty index on the other hand for inequality reduction a poorer poor should receive a higher amount of subsidy than a richer poor minimal progressivity and the ranks of the persons in the pre and post subsidized distributions should be the same an illustration of the general optimal subsidy function using some specific poverty index and an income distribution is provided

inflation targeting genuine effects or publication selection bias abstract this paper uses a meta regression analysis mra to evaluate the impact of publication selection bias as for the macroeconomic effects of inflation targeting it a popular approach to implementing monetary policy documented in the existing literature using 8 059 point estimates from 113 studies we show that a significant part of the documented positive effects of it on inflation and to some extent output growth volatility is in fact due to publication selection bias in particular results pointing to lower inflation volatility and higher real gdp growth tend to be favored by researchers as well as those pointing to statistically significant macroeconomic effects however even after controlling for these two types of biases we find it to be correlated with lower inflation and higher real gdp growth differently the evidence on the it inflation volatility relationship is found to be less clear

inflation targeting in emerging economies panel evidence abstract this paper shows there is no evidence that the inflation targeting regime it improves economic performance as measured by the behavior of inflation and output growth in developing countries the control of common time effects results in less negative and less significant it impacts on inflation inflation volatility and output growth volatility than previously found in the literature additionally our analysis shows robust evidence of lower output growth during it adoption on balance although lower long run mean inflation signals that the central banks of emerging economies with inflation targeting are more inflation averse the costs of disinflation have not been lower than under other monetary regimes

inflation targeting should it be modeled as an instrument rule or a targeting rule abstract the paper discusses how current inflation targeting should be modeled and argues that it is better represented as a commitment to a targeting rule a rule specifying operational objectives for monetary policy or a condition for the target variables than as a commitment to a simple instrument rule like a taylor rule

international experiences with different monetary policy regimes any views expressed in this paper are those of the author only and not those of columbia university or the national bureau of economic research abstract this paper examines the international experiences with four basic types of monetary policy regimes 1 exchange rate targeting 2 monetary targeting 3 inflation targeting and 4 monetary policy with an implicit but not an explicit nominal anchor the basic theme that emerges from this analysis is that transparency and accountability are crucial to constraining discretionary monetary policy so that it produces desirable long run outcomes because the devil is in the details in achieving transparency and accountability what strategy will work best in a country depends on its political cultural and economic institutions as well as on its past history

modelling the treatment effect of renewable energy policies on economic growth evaluation from mena countries abstract this paper investigates the effects of renewable energy re policies on economic growth in mena countries using the propensity score matching methodology our empirical analysis conducted on a sample of 24 economies 17 re and 7 non re countries from 1980 to 2012 shows that the treatment effect of re policies has a significant and positive impact on stimulating and promoting economic growth in mena economies that have implemented these energy policies re policies alone however are not sufficient this change requires the collective long term commitment of all stakeholders including governments citizens financiers private companies and international agencies this would help impede policy overlaps and incoherence as well as consequently improve the overall policy effectiveness

inflation targeting in colombia 2002 2012 proquest denotes formulae omitted over the last twenty years nearly thirty countries have adopted inflation targeting regimes to conduct monetary policy in addition to the announce ment of specific inflation targets inflation targeting regimes have been characterized by increased transparency enhanced communication with the public and explicit accountability mechanisms moreover their policy strategy is based on setting short run interest rates rather than on targeting monetary aggregates in principle inflation targeting regimes also increase exchange rate flexibility the performance of inflation targeting regimes has been a matter of exten sive research for instance ball and sheridan and lin and ye conclude that in industrialized countries inflation targeting did not make a difference in inflation and output behavior 1 the spirit of these conclusions is echoed in two recent surveys on the performance of inflation targeting 2 another line of research on inflation targeting in industrialized countries studies its impact on sacrifice ratios output losses per point of inflation during monetary driven disinflations according to proponents inflation targeting anchors inflation expectations and it should thus allow for less costly disinflation processes while goncalves and carvalho find strong evidence supporting this hypoth esis in developed countries brito shows that the results are not robust to the inclusion of time effects 3 de roux and hofstetter conclude that inflation targeting allows for less costly disinflations even when controlling for time effects but only if disinflations are slow 4 for fast disinflations it does not yield less costly disinflations for developing countries the evidence is less conclusive goncalves and salles find that inflation targeting allows for a greater reduction in inflation and lower output volatility a result confirmed by lin and ye 5 brito and bystedt however suggest that the greater inflation reduction came at the expense of poorer output growth 6 in the surveys walsh concludes that evidence on inflation targeting in developing countries is clearly favorable to the regime while ball is more skeptical calling the outcomes inconclusive 7more recently de carvalho filho shows that during the recent global finan cial crisis inflation targeting nations outperformed non inflation targeting nations on several dimensions for both developed and developing economies their policy response was more aggressive they allowed the exchange rate to more effectively absorb the shocks and they recorded a stronger macro economic performance output industrial production and unemployment 8the vast empirical literature comparing performance across different mon etary regimes stands in contrast to the relatively scant research on the tools strategies goals and dilemmas faced by inflation targeting central banks espe cially in developing countries while there is good information on the overall comparative performance of these regimes little information is available on the political economy dimensions the increasing variety of instruments and goals of inflation targeting central banks and the challenges that lie ahead for them in this paper we fill part of this gap by examining the experience of the cen tral bank of colombia banco de la republica over the last decade a period of consolidation and innovation of its inflation targeting strategy colombia is one of five large latin american economies that have well established inflation targeting regimes along with brazil chile mexico and peru all of these countries adopted inflation targeting more than ten years ago yet their performance tools and goals have not been extensively studied cen tral banks in the region have used a variety of tools beyond short run policy interest rates including liquidity and reserve requirements credit provisions capital controls and interventions in the foreign exchange markets

transfers targeting and poverty poverty ravi kanbur in spite of poverty alleviation programmes in the uk and the us poverty still exists in both countries and a significant share of welfare funds do not even reach the poor this is partly because funds are simply limited and shrinking but there are also fundamental problems in designing programmes of poverty alleviation maximum effectiveness would seem to suggest that transfers ought to be targeted as precisely as possible at those who most need them unfortunately this is socially costly for two reasons first means based transfers imply that the poor face a very high marginal tax rate sometimes in excess of 100 which is a major disincentive to work effort the second difficulty is the stigma attached to means testing and the low take up rate this may induce this article presents the salient features of the us and uk poverty programmes discusses the principles behind poverty alleviation and considers various reform proposals among the alternatives is the idea of shifting even further away from means testing towards contingent benefits making transfers dependent on the characteristics most often associated with poverty the author argues that the present programmes reflect some essential considerations on which it is possible to build and that wholesale reform would be inappropriate nor is it clear that public support exists for a major extension of transfers to the poor indeed existing inefficiencies may be part of the price of public acceptance of the transfer programmes already in place

does inflation targeting really make a difference evaluating the treatment effect of inflation targeting in seven industrial countries abstract we evaluate the treatment effect of inflation targeting in seven industrial countries that adopted this policy in the 1990s to address the self selection problem of policy adoption we make use of a variety of propensity score matching methods recently developed in the treatment effect literature our results show that inflation targeting has no significant effects on either inflation or inflation variability in these seven countries further evidence from long term nominal interest rates and income velocity of money also supports the window dressing view of inflation targeting

does inflation targeting make a difference in developing countries we evaluate the treatment effect of inflation targeting in thirteen developing countries that have adopted this policy by the end of 2004 using a variety of propensity score matching methods we show that on average inflation targeting has large and significant effects on lowering both inflation and inflation variability in these thirteen countries however the effectiveness of inflation targeting on lowering inflation is found to be quite heterogeneous the performance of a given inflation targeting regime can be affected by country characteristics such as government s fiscal position central bank s desire to limit the movements of exchange rate its willingness to meet the preconditions of policy adoption and the time length since the policy adoption

a stable international monetary system emerges inflation targeting is bretton woods reversed a stable international monetary system has emerged since the early 1990s a large number of industrial and a growing number of developing countries now have domestic inflation targets administered by independent and transparent central banks these countries place few restrictions on capital mobility and allow their exchange rates to float the domestic focus of monetary policy in these countries does not have any obvious international cost inflation targeters have lower exchange rate volatility and less frequent sudden stops of capital flows than similar countries that do not target inflation inflation targeting countries also do not have current accounts or international reserves that look different from other countries this system was not planned and does not rely on international coordination there is no role for a center country the imf or gold it is durable in contrast to other monetary regimes no country has been forced to abandon an inflation targeting regime succinctly it is the diametric opposite of the post war system bretton woods reversed

market power inflation targeting and commodity currencies abstract the commodity currency literature highlights the robust exchange rate response to fluctuations in global commodity prices that occurs for major commodity exporters the magnitude of the response however varies widely across countries and over time horizons this paper examines the real exchange rates of 51 commodity exporters over the period from 1980 to 2010 and finds that in the long run a higher degree of market power in the world commodity trade can reduce the exchange rate response while in the short run an inflation targeting regime can amplify it these differential impacts across countries and horizons are of particular relevance for monetary policy making and for trade strategy in commodity abundant economies

geographical targeting for poverty alleviation in the face of rising public deficits and shrinking public resources geographical targeting may be a viable way to allocate resources for poverty alleviation in developing countries efficiency ca

geographical targeting for poverty alleviation an introduction to the special issue in the face of rising public deficits and shrinking public resources geographical targeting may be a viable way to allocate resources for poverty alleviation in developing countries efficiency can be increased and leakage to the non poor reduced substantially by targeting increasingly smaller areas this article and more generally the symposium on geographical targeting for poverty alleviation proposes several techniques for augmenting data to produce more detailed poverty maps it focuses on practical considerations in the design of geographically targeted poverty alleviation programs in particular it assesses the advantages and disadvantages of geographical targeting and describes how geographic information systems can be applied to improve poverty mapping

bank competition and financial stability in asia pacific the impact of bank competition on financial stability has been a focus of academic and policy debate over the last two decades and particularly since the 2007 08 global financial crises beck 2008 oecd 2011 under the traditional competition fragility view banks cannot earn monopoly rents in competitive markets and this results in lower profits capital ratios and charter values this makes banks less able to withstand demand or supply side shocks and encourages excessive risk taking marcus 1984 alternatively the competition stability view suggests that competition leads to greater stability a less competitive banking market may lead to more risk taking if the big banks are deemed too important to fail and as such obtain implicit or explicit subsidies via government safety nets mishkin 1999 in addition banks with more market power tend to charge higher loan rates which may induce borrowers to assume greater risk leading to greater default in competitive banking markets loan rates are lower too big to fail issues and safety net subsidies are smaller and this results in a positive link between bank competition and stability boyd and de nicolo 2005 it could also be the case as noted by martinez miera and repullo 2010 that bank competition and stability are linked in a non linear manner and in a similar vein berger et al 2009 argue that competition and concentration may coexist and can simultaneously induce stability or fragility

an assessment of inflation targeting in a quantitative monetary business cycle framework evidence from four early adopters this article examines the effectiveness of inflation targeting it to stabilize the real economy in advanced countries where it was adopted in the early 1990s to quantitatively assess it this article employs the monetary business cycle accounting methodology recently developed by sustek 2011 which is an extended version of chari kehoe and mcgrattan 2007 to monetary models our main finding is that the monetary policy wedge that captures economic fluctuations caused by monetary policy has significantly declined since the implementation of it in the early 1990s the results suggest that advanced economies such as australia canada sweden and the united kingdom that adopted it in the early 1990s have been successful in stabilizing business cycle fluctuations

inflation targeting regimes abstract this paper divides the monetary frameworks of countries that use an inflation target to define their monetary framework into three different regimes i full fledged inflation targeting ii implicit price stability anchor and iii inflation targeting lite the regimes are differentiated by the clarity and credibility of the commitment to the inflation target the revealed preference for different regimes is related empirically to cross country structural differences in economic and financial development policy implications of moving from one regime to another are drawn especially for emerging market countries aiming at full fledged inflation targeting

unnatural selection perverse incentives and the misallocation of credit in japan we examine the misallocation of credit in japan associated with the perverse incentives faced by banks to provide additional credit to the weakest firms firms are more likely to receive additional bank credit if they arein poor financial condition because troubled japanese banks have an incentive to allocate credit to severely impaired borrowers in order to avoid the realization of losses on their own balance sheets this evergreening behavior is more prevalent among banks that have reported capital ratios close to the required minimum and is compounded by the incentives arising from extensive corporate affiliations

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

bank firm relationships and contagious banking crises this paper argues that in an open economy a banking system with close bank firm relationships may be easily subject to contagious banking crises because it is difficult to distinguish between crony capitalism and good main bank relationships 1 show that if international investors cannot distinguish the bank type the distinction between crony capitalism and good main bank relationships becomes very fuzzy in particular the model can explain sequences of bank defaults within a country even if the insolvent banks are very few ex ante as well as sequences of banking crises among countries that are equally rated by international investors but indeed differ in the ex ante solvency of their banking system

taylor rules and exchange rate predictability in emerging economies abstract this study demonstrates the relationship between exchange rate determination and an endogenous monetary policy represented by taylor rules we fill a gap in the literature by focusing on a group of fifteen emerging economies that adopted free floating exchange rates and inflation targeting beginning in the mid 1990s because of the limited span of the time series which is a common obstacle to studying emerging economies we employ panel data regressions to produce more efficient estimates following the recent literature we use a robust set of out of sample statistics incorporating bootstrapped and asymptotic distributions for the diebold mariano statistic the clark and west statistic and theil s u ratio by evaluating different specifications for the taylor rule exchange rate model based on their out of sample performances we find that a present value forward looking specification shows strong evidence of exchange rate predictability

fiscal rules and government borrowing costs international evidence we find that the adoption of numerical fiscal rules reduces government borrowing costs in a sample of 101 advanced and developing countries for 1985 2010 we apply a variety of propensity score matching methods to address the self selection problem of policy adoption and find strong evidence that fiscal rules have large and significant treatment effects on lowering government borrowing costs in both international and domestic financial markets the results are robust to changes in country sample and alternative estimation methodology and are consistent with fiscal rules helping to build policy credibility by reducing the probability of default and the risk premium on government debt that compensates lenders for this possibility jel e43 g12 h60

inflation targeting in brazil constructing credibility under exchange rate volatility abstract this paper assesses the challenges faced by the inflation targeting regime in brazil the inflation targeting framework has played a critical role in macroeconomic stabilization we stress two important challenges construction of credibility and exchange rate volatility the estimations indicate the following results i the inflation targets have worked as an important coordinator of expectations ii the central bank has reacted strongly to inflation expectations iii there has been a reduction in the degree of inflation persistence and iv the exchange rate pass through for administered or monitored prices is two times higher than for market prices

who lends to riskier and lower profitability firms evidence from the syndicated loan market this paper exploits a unique data set on bank firm relationships based on syndicated loan deals to examine the effect of banks credit risk and capital on firms risk and performance our data set is a multilevel cross section which essentially allows controlling for all bank and firm characteristics through respective fixed effects thus avoiding concerns regarding omitted variables we find that banks with higher credit risk are associated with more risky firms with lower profitability and market value in turn we find that banks with higher risk weighted capital ratios lend to riskier firms with less market value our results are indicative of a strong adverse selection mechanism and highlight the need to monitor the risky banks more closely especially as we consider large and influential syndicated loan deals

inflation targeting and the forward bias puzzle in emerging countries abstract based on quarterly data on 31 emerging countries among which 16 are inflation targeting countries from 1990q1 to 2014q3 we obtain a strong support for the conjecture that the implementation of inflation targeting weakens the fisherian relation between expected depreciation and the interest rate differential uncovered interest parity condition and thus is conducive to the appearance of the forward bias puzzle in emerging countries we show that this reflects the performance of inflation targeting regimes in lowering the level and volatility of inflation our finding holds when controlling for country specific effects time specific effects global disinflation exchange rate management crises and using different econometric techniques

transitions to inflation targeting panel evidence from panel estimates of an extended version of the taylor rule reaction function that adds lagged inflation output gaps and exchange rates we confirm that inflation is more central to the setting

the role of inflation targeting in international debt denomination in developing countries abstract this paper analyzes the inflation targeting experience of developing countries as an effective monetary policy framework to promote changes in the currency composition of their international debt using matching with difference in differences to address the self selection bias we find that inflation targeting has led to a 3 6 percentage point reduction in the foreign currency share of international debt in targeting countries when compared to non targeting countries with the effect especially pronounced for sovereign international debt differentiating by type of owner we find a reduction of the foreign currency share in foreign held total sovereign debt but no effect on domestic held debt furthermore from the analysis of the us dollar and euro shares we find that inflation targeting has contributed to a 9 percentage points lower dollar share in international debt in targeting countries compared to non targeting countries while the effect on the euro share is negligible this not only provides evidence that the structural features of international financial markets matter but also that monetary policy can help developing countries reduce their reliance on foreign currency debt especially if it is held by foreign investors