The Journey to Inflation Targeting: Easier Said than Done the Case for Transitional Arrangements Along the Road

45 Pages Posted: 21 Jul 2015

See all articles by Bernard Laurens

Bernard Laurens

International Monetary Fund (IMF) - Monetary and Foreign Exchange Operations Division

Kelly Eckhold

International Monetary Fund (IMF)

Darryl King

International Monetary Fund (IMF)

Nils O. Maehle

International Monetary Fund (IMF)

Abdul Naseer

International Monetary Fund (IMF) - IMF Institute

Alain Durré

European Central Bank (ECB) - Directorate General Economics; IéSEG - Université Catholique de Lille; National Center for Scientific Research - LEM

Date Written: June 2015

Abstract

Countries with evolving monetary regimes that decide to embark on “the Journey to inflation targeting” may not be able to adopt a full-fledged inflation targeting regime immediately. Those countries would be better off adopting transitional arrangements that take advantage of the informational content of monetary aggregates, developing an economic analysis capacity, and concentrating on monetary operations aimed at steering money market interest rates. This approach would allow the central bank to buy time for developing the building blocks for effective monetary policy, support transparent central bank communication, and limit the potential for undesirable outcomes along the road.

Keywords: Inflation targeting, Monetary policy, Monetary aggregates, Economic analysis, central bank, exchange rate, interest rates, central banks, international monetary fund, money supply, price stability, fiscal policy, foreign exchange, central bank independence, fiscal policies

JEL Classification: E50

Suggested Citation

Laurens, Bernard J. and Eckhold, Kelly and King, Darryl and Maehle, Nils O. and Naseer, Abdul and Durre, Alain C. J., The Journey to Inflation Targeting: Easier Said than Done the Case for Transitional Arrangements Along the Road (June 2015). IMF Working Paper No. 15/136, Available at SSRN: https://ssrn.com/abstract=2633922

Bernard J. Laurens (Contact Author)

International Monetary Fund (IMF) - Monetary and Foreign Exchange Operations Division ( email )

Monetary and Capital Markets Department
700 19th Street NW
Washington, DC 20431
United States

Kelly Eckhold

International Monetary Fund (IMF) ( email )

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

Darryl King

International Monetary Fund (IMF) ( email )

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

Nils O. Maehle

International Monetary Fund (IMF) ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Abdul Naseer

International Monetary Fund (IMF) - IMF Institute ( email )

700 19 th Street NW
Washington, DC 20431
United States

Alain C. J. Durre

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

IéSEG - Université Catholique de Lille ( email )

3, rue de la Digue
F-59800 Lille
France

National Center for Scientific Research - LEM ( email )

106-112 Boulevard de l'Hopital
F- 75647 Paris Cedex 13
France

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