Inflation Targeting and Real Exchange Rates in Emerging Markets

Joshua Aizenman, Michael Hutchison and Ilan Noy

No 14561, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate inflation targeting (IT) in emerging markets, focusing on the role of the real exchange rate and the distinction between commodity and non-commodity exporters. IT emerging markets appear to follow a "mixed strategy" whereby both inflation and real exchange rates are important determinants of policy interest rates. The response to real exchange rates, however, is more constrained than in non-IT regimes. We also find that the response to real exchange rates is strongest in those countries following IT policies that are relatively intensive in exporting basic commodities; and present a theoretical model that explains these empirical results.

JEL-codes: E52 E58 F15 F3 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-opm
Note: IFM ITI ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Published as Aizenman, Joshua & Hutchison, Michael & Noy, Ilan, 2011. "Inflation Targeting and Real Exchange Rates in Emerging Markets," World Development, Elsevier, vol. 39(5), pages 712-724, May.

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Journal Article: Inflation Targeting and Real Exchange Rates in Emerging Markets (2011)
Working Paper: Inflation Targeting and Real Exchange Rates in Emerging Markets* (2008)
Working Paper: Inflation Targeting and Real Exchange Rates in Emerging Markets (2008)
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