The Role of Inflation Targeting in Exchange Rate Unification Policy: Difference-in-Differences Approach (in Persian)

Mehdi Yazdani () and Mahnaz Mohammadi ()
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Mehdi Yazdani: Shahid Beheshti University
Mahnaz Mohammadi: Shahid Beheshti University

Journal of Monetary and Banking Research (فصلنامه پژوهش‌های پولی-بانکی), 2020, vol. 12, issue 42, 721-744

Abstract: Generally, one of the important issue in open macroeconomics and international finance literature is the innovations of exchange rate regimes, and exchange rate unification policy is one of the most important reforming policies in developing and emerging countries. By considering the experience of other emerging countries for exchange rates unification policy in this study, it will be investigated that what is the role of inflation targeting for the implementation of the exchange rate unification policy? Moreover, it will be examined that can inflation targeting reduces the inflationary effects of this policy? For this purpose, the difference-in-differences approach is employed to estimate the effects of this policy using panel data during the period 1984-2016. According to the results, in countries which applied exchange rate unification policy, the lower inflation has been experienced in inflation targeting countries. However, the role of macroeconomic conditions and the economic environment have been important.

JEL-codes: C23 E58 F31 (search for similar items in EconPapers)
Date: 2020
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