Inflation Targeting in Transition Countries: Experience and Prospects

Jiri Jonas and Frederic Mishkin ()

No 9667, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the inflation targeting experience in three transition countries: the Czech Republic, Poland and Hungary. While the examined countries have missed inflation targets often by a large margin, they nevertheless progressed well with disinflation. A key lesson from the experience of the inflation targeting transition countries is that economic performance will improve and support for the central bank will be higher if the central banks emphasize avoiding undershoots of the inflation target as much as avoiding overshoots. Also economic performance will be enhanced if inflation targeting central banks in transition countries do not engage in active manipulation of the exchange rate. The relationship between the central bank and the government in these countries has been quite difficult, but this can be alleviated by having a direct government involvement in the setting of the inflation target and with a more active role of the central bank in communicating with both the government and the public. In addition having technocrats appointed as the head of the central bank rather than politicians may help in depersonalizing the conduct of monetary policy and increase support for the independence of the central bank. The paper also addresses the future perspective of monetary policy in the transition economies and concludes that even after the EU accession, inflation targeting can remain the main pillar of monetary strategy in the three examined accession countries during the time before they will join the EMU.

JEL-codes: E5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-ifn, nep-mac and nep-tra
Date: 2003-05
Note: EFG ME
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w9667.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:9667

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9667
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().