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On the Future of Inflation Targeting in East Asia

Volz, Ulrich

Authors



Abstract

This article analyses the problems associated with inflation targeting (IT) regimes in a number of East Asian countries. It scrutinizes the policy conflicts that can arise when a central bank that has adopted a formal inflation target to guide the conduct of monetary policy simultaneously manages the exchange rate and pursues financial stability objectives. To this end, it empirically investigates the importance of exchange rate and terms of trade movements as determinants of inflation rates across East Asian economies and discusses the role of central banks in guarding financial stability and the ways this may conflict with an IT regime. The article argues that IT never really has been a suitable monetary framework for East Asian countries and that it should hence be supplanted by transparent monetary frameworks that explicitly recognize the multiple goals that are being pursued by East Asian central banks.

Citation

Volz, U. (2015). On the Future of Inflation Targeting in East Asia. Review of Development Economics, 19(3), 638-652. https://doi.org/10.1111/rode.12173

Journal Article Type Article
Publication Date Aug 1, 2015
Deposit Date Dec 29, 2014
Journal Review of Development Economics
Print ISSN 1363-6669
Electronic ISSN 1467-9361
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 19
Issue 3
Pages 638-652
DOI https://doi.org/10.1111/rode.12173
Keywords Inflation Targeting; Monetary Policy; East Asia
Related Public URLs http://onlinelibrary.wiley.com/doi/10.1111/rode.12173/abstract