Inflation Targeting in Georgia: Are We There Yet?

35 Pages Posted: 23 Aug 2007

See all articles by Giorgi Bakradze

Giorgi Bakradze

Georgetown University

Andreas Billmeier

International Monetary Fund (IMF) - Middle East and Central Asia Department

Date Written: August 2007

Abstract

This paper evaluates whether Georgia is ready to adopt inflation targeting (IT), a monetary policy framework that several emerging markets have adopted recently. After reviewing selected prerequisites for successfully implementing IT, the paper focuses on whether one specific precondition is in place-an empirically stable monetary transmission mechanism. Building on a baseline VAR model, it presents several extensions to explore the various channels using causality tests, impulse responses, and variance decompositions. The paper finds that once the central bank overcomes some institutional and operational weaknesses and establishes a more reliable transmission mechanism, it could adopt IT over the medium term.

Keywords: Inflation targeting, Georgia, Monetary policy, Monetary transmission mechanism, Working Paper

Suggested Citation

Bakradze, Giorgi and Billmeier, Andreas, Inflation Targeting in Georgia: Are We There Yet? (August 2007). IMF Working Papers, Vol. , pp. 1-33, 2007. Available at SSRN: https://ssrn.com/abstract=1007941

Giorgi Bakradze

Georgetown University ( email )

Washington, DC 20057
United States

Andreas Billmeier (Contact Author)

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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