{"title":"The impact of exchange rate volatility on inflation targeting monetary policy in emerging and advanced economies","authors":"Helena Glebocki Keefe","doi":"10.1111/infi.12368","DOIUrl":null,"url":null,"abstract":"<p>Exchange rate volatility is a stated concern for policymakers in many emerging market economies. This paper investigates whether exchange rate volatility impacts the commitment to inflation targeting monetary policy by analyzing thirteen emerging market economies and nine advanced economies from 2000 to 2016. Using a dynamic panel threshold regression model, the response of the domestic target interest rate to the inflation gap, output gap, and exchange rate condition is tested in scenarios of above-threshold and below-threshold exchange rate volatility. Both emerging and advanced economies adhere to their inflation targeting commitments when exchange rate volatility is below 1%, but are unable or unwilling to respond to deviations in the inflation gap when volatility is beyond this threshold value.</p>","PeriodicalId":46336,"journal":{"name":"International Finance","volume":"23 3","pages":"417-433"},"PeriodicalIF":1.3000,"publicationDate":"2020-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/infi.12368","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Finance","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/infi.12368","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 3
Abstract
Exchange rate volatility is a stated concern for policymakers in many emerging market economies. This paper investigates whether exchange rate volatility impacts the commitment to inflation targeting monetary policy by analyzing thirteen emerging market economies and nine advanced economies from 2000 to 2016. Using a dynamic panel threshold regression model, the response of the domestic target interest rate to the inflation gap, output gap, and exchange rate condition is tested in scenarios of above-threshold and below-threshold exchange rate volatility. Both emerging and advanced economies adhere to their inflation targeting commitments when exchange rate volatility is below 1%, but are unable or unwilling to respond to deviations in the inflation gap when volatility is beyond this threshold value.
期刊介绍：
International Finance is a highly selective ISI-accredited journal featuring literate and policy-relevant analysis in macroeconomics and finance. Specific areas of focus include: · Exchange rates · Monetary policy · Political economy · Financial markets · Corporate finance The journal''s readership extends well beyond academia into national treasuries and corporate treasuries, central banks and investment banks, and major international organizations. International Finance publishes lucid, policy-relevant writing in macroeconomics and finance backed by rigorous theory and empirical analysis. In addition to the core double-refereed articles, the journal publishes non-refereed themed book reviews by invited authors and commentary pieces by major policy figures. The editor delivers the vast majority of first-round decisions within three months.
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