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Effect of Inflation Targeting on Emerging Markets Economies 1 Leonardo Leiderman 17 October 2002
5 Key Questions on Inflation Targeting ,[object Object],[object Object],[object Object],[object Object],[object Object],2
Why Lower Inflation?  Inflation convergence is a prerequisite for integration with the global world economy. ,[object Object],3 Turkey Current: 68.5%; Targets: 35% (02), 20% (03), 12% (04)
Why Use Inflation Targeting? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],4
How to Implement Inflation Targeting? 5 ,[object Object],[object Object],[object Object]
EM Realities Pose Some Difficulties for Inflation Targeting 6 ,[object Object],[object Object],[object Object],[object Object],Implications:  need a 'conservative' central bank and there is likely to be an overburdening of monetary policy.  When possible, fx market intervention should be avoided, as in many cases it has proven to be counterproductive.
Israel:  High Inflation Preceded Gradual Inflation Convergence Under IT 7
Mexico’s Disinflation 8
Inflation and Inflation Targets in Chile ( a) 9 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 Source: Landerretche , Morande ,  and Schmidt- Hebbel (1998). ( a) Target is set in September for the following calendar year
Israel….. 10
THE EXCHANGE RATE OF THE NIS VIS-A-VIS THE CURRENCY BASKET 11
Israel's budget deficit -  % of GDP 12
Monetary Policy Reaction to Expected- Inflation Scares: The Case of Israel 13
Real ex-ante Bank of Israel interest rate the nominal rate less market based inflation expectations for the next 12 months 14
The Bottom Line: Current Nominal and Real Interest Rates 15
Fiscal Discipline is Crucial: The Case of Brazil Net public debt (% of GDP) PSBR (% GDP) 16
Impact on Financial Markets 17 ,[object Object],[object Object],[object Object]
Effect of Inflation Targeting on Emerging Markets Economies 18 Leonardo Leiderman 17 October 2002

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Inflation Targeting

Notes de l'éditeur

  1. 13