The Scope for Inflation Targeting in Developing Countries

Paul Masson, Miguel A. Savastano and Sunil Sharma ()

Chapter 10 in Macroeconomic Modelling and Monetary and Exchange Rate Regimes, 2019, pp 331-383 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Inflation targeting (IT) serves as monetary policy framework in several advanced economies, where it has enhanced policy transparency and accountability. The chapter considers its wider applicability to developing countries. The prerequisites for a successful IT framework are identified as the ability to carry out an independent monetary policy (free of fiscal dominance or commitment to another nominal anchor, like the exchange rate) and a quantitative framework linking policy instruments to inflation. These prerequisites are largely absent among developing countries, though several of them could, with some further institutional changes and an overriding commitment to low inflation, make use of an IT framework.

Keywords: Exchange Rates; Modelling; Monetary Unions; Inflation Targeting (search for similar items in EconPapers)
JEL-codes: F45 (search for similar items in EconPapers)
Date: 2019
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Working Paper: The Scope for Inflation Targeting in Developing Countries (1997)
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