Do Exchange Rates Matter in Inflation Targeting Regimes? Evidence from a VAR Analysis for Poland and Chile

Felix Hammermann
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Felix Hammermann: Kiel Institute for World Economics

A chapter in Monetary Policy and Macroeconomic Stabilization in Latin America, 2005, pp 115-148 from Springer

Abstract: Abstract Alternative monetary policy strategies under flexible exchange rate regimes are described by a generalized reaction function, which is used as a starting point for the empirical investigation of the role of the exchange rate in inflation targeting regimes. A vector autoregressive model for Poland revealed that Polish monetary policy of the 1990s shows a clear break when the exchange rate as the nominal anchor is replaced by inflation targeting. Still, the exchange rate was not abandoned completely. In Chile, inflation targeting was in place for the entire sample period. Exchange rate policy is used in times of international financial turmoil.

Keywords: Exchange Rate; Interest Rate; Monetary Policy; Central Bank; Real Exchange Rate (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-28201-3_7

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DOI: 10.1007/3-540-28201-7_7

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