Inflation Targeting in Transition Economies

Jiri Jonas and Frederic S. Mishkin

in The Inflation-Targeting Debate

Published by University of Chicago Press

Published in print February 2005 | ISBN: 9780226044712
Published online February 2013 | e-ISBN: 9780226044736 | DOI:
Inflation Targeting in Transition Economies

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This chapter analyzes the experience of three countries that moved to an inflation-targeting regime: the Czech Republic, Hungary, and Poland. It discusses a number of specific issues for inflation targeting in transition economies: what inflation measure to target, whether to target a point or a range, what should be the time horizon for the inflation target, who should set the inflation target, what should be the response to faster-than-targeted disinflation, how monetary policy should respond to deviations of inflation from the target, how much the floor of the inflation target should be emphasized relative to the ceiling, and what role the exchange rate should play in an inflation-targeting regime. The chapter concludes by considering the future prospects of inflation targeting in transition economies in connection with the planned adoption of the euro, focusing on inflation targeting within the fluctuation band of exchange rate mechanism 2 (ERM2) regime and on the potential conflict between the inflation target and the exchange rate target.

Keywords: inflation targeting; transition economies; Czech Republic; Hungary; Poland; monetary policy; euro; exchange rate; disinflation

Chapter.  30284 words.  Illustrated.

Subjects: Financial Markets

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