Inflation Targeting Arrangements in Asia: Exploring the Role of the Exchange Rate

Tony Cavoli () and Ramkishen S. Rajan ()
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Tony Cavoli: School of Economics, University of Adelaide, Australia

SCAPE Policy Research Working Paper Series from National University of Singapore, Department of Economics, SCAPE

Abstract: Since the Asian crisis it has been recognized that exchange rate and monetary policy strategies must involve a “fairly high” element of flexibility rather than a single-minded defense of a particular rate. One way this flexibility might be introduced is by a country adopting an open economy inflation targeting arrangement. This particular policy regime has been officially implemented in several Asian countries in recent years, but the normative implications of inflation targeting appear at times to be at odds with the requirements regarding exchange rate flexibility. This paper presents an analysis of some of the issues relevant to Asian central banks implementing an inflation targeting arrangement with specific focus on the role of the exchange rate.

Keywords: Asia; exchange rate regime; inflation targeting arrangement; fear of floating; monetary policy rule; pass through (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-sea
Date: 2006-01
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