Essays on Economic Policy (ESPE in Spanish) - Inflation Targeting in Emerging Economies
En la revista Ensayos sobre Política Económica (ESPE) divulgamos los resultados y las propuestas de política que surgen de investigaciones académicas realizadas en el Banco de la República. Cuando nos lea, tenga siempre presente que el contenido de nuestros artículos, así como los análisis y conclusiones que de ellos se derivan, son exclusiva responsabilidad de sus autores. El material divulgado en nuestra revista ESPE no compromete ni representa la opinión del Banco de la República ni la de su Junta Directiva.
Abstract
I document the decline in the rate of inflation in 14 emerging economies after the implementation of an inflation targeting (IT) regime. I briefly describe how each country implements the IT, and argue that the new regime forced policy coordination amongst various governmental units, allowed for a more singular focus, and more transparent policy making process. This allowed agents to better coordinate expectations which precipitated the decline in the rate of inflation. I also document the difficulty with hitting a precise inflation target over a short period of time in the same countries. A model of policy coordination is presented to show how inflation is determined by joint behavior of monetary and fiscal policies.
