Inflation-targeting in the Run-up to the Crisis

Daniela Gabor

Chapter 5 in Central Banking and Financialization, 2011, pp 153-185 from Palgrave Macmillan

Abstract: Abstract The central bank explained that the policy shift had been driven by two factors (NBR 2005a). First, it recognized the ineffectiveness of setting monetarist-inspired monetary targets. Instead, it sought to join a growing consensus seeking to align the theoretical underpinnings of monetary policy strategies with developments in general equilibrium monetary theory. Second, it maintained that its practices of exchange-rate manipulation would no longer be sustainable under further capital account liberalization that allowed nonresidents to purchase Treasury bills and to hold bank deposits starting with April 2005 (Isărescu 2005). Tackling the increased vulnerability to speculative capital movements required interest-rate manipulation (NBR 2005c).

Keywords: Monetary Policy; Central Bank; Banking Sector; Money Market; Capital Inflow (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:stuchp:978-0-230-29504-9_5

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DOI: 10.1057/9780230295049_5

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