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

In: Monetary Policy and Macroeconomic Stabilization in Latin America

Author

Listed:
  • Felix Hammermann

    (Kiel Institute for World Economics)

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.

Suggested Citation

  • Felix Hammermann, 2005. "Do Exchange Rates Matter in Inflation Targeting Regimes? Evidence from a VAR Analysis for Poland and Chile," Springer Books, in: Rolf J. Langhammer & Lúcio Vinhas Souza (ed.), Monetary Policy and Macroeconomic Stabilization in Latin America, pages 115-148, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-28201-3_7
    DOI: 10.1007/3-540-28201-7_7
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    Cited by:

    1. Ahmet Benlialper & Hasan Cömert & Nadir Öcal, 2017. "Asymmetric Exchange Rate Policy in Inflation Targeting Developing Countries," ERC Working Papers 1702, ERC - Economic Research Center, Middle East Technical University, revised Feb 2017.
    2. Civcir, Irfan & Akçaglayan, AnIl, 2010. "Inflation targeting and the exchange rate: Does it matter in Turkey?," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 339-354, May.
    3. Ahmet Benlialper & Hasan Cömert, 2016. "Implicit asymmetric exchange rate peg under inflation targeting regimes: the case of Turkey," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1553-1580.
    4. Sebastian Edwards, 2006. "The Relationship Between Exchange Rates and Inflation Targeting Revisited," NBER Working Papers 12163, National Bureau of Economic Research, Inc.

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