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Ex ante Dynamics of Real Effects of Monetary Policy: Theory and Evidence for Poland and Russia, 2001–2003

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  • Wojciech W Charemza

    ([1] National Bank of Poland, BBM, Warsaw, Poland [2] University of Leicester, Leicester, UK.)

  • Svetlana Makarova

    ([1] National Bank of Poland, BBM, Warsaw, Poland [2] European University at St Petersburg, St Petersburg, Russia)

Abstract

This paper proposes a new indicator of the expected real effects of an inflation-targeting monetary policy. This indicator can be derived from a simple two-dimensional vector autoregressive model of inflation and the output gap. A simulation experiment illustrates its rationale for timing monetary decisions, if the control of output is a secondary policy target. Applied for Poland, this might have contributed to a policy that would have reduced Polish inflation in 2003 and increased output growth in 2004. We also show how this indicator can be applied for RussiaComparative Economic Studies (2006) 48, 458–479. doi:10.1057/palgrave.ces.8100180

Suggested Citation

  • Wojciech W Charemza & Svetlana Makarova, 2006. "Ex ante Dynamics of Real Effects of Monetary Policy: Theory and Evidence for Poland and Russia, 2001–2003," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 48(3), pages 458-479, September.
    • Handle: RePEc:pal:compes:v:48:y:2006:i:3:p:458-479
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    Cited by:

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    2. Wojciech Charemza & Svetlana Makarova & Imran Shah, 2015. "Making the most of high inflation," Applied Economics, Taylor & Francis Journals, vol. 47(34-35), pages 3723-3739, July.
    3. N. Gregory Mankiw & Ricardo Reis, 2003. "What Measure of Inflation Should a Central Bank Target?," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1058-1086, September.
    4. Charemza, Wojciech W. & Makarova, Svetlana, 2005. "Ex-ante dynamics of real effects of monetary policy : theory and evidence for Poland and Russia," BOFIT Discussion Papers 20/2005, Bank of Finland, Institute for Economies in Transition.
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