Amato, Jeffrey and S. Gerlach, 2001, “Inflation Targeting in Emerging Market and Transition Economies: Lessons After A Decade” (Centre for Economic Policy Research Discussion Paper Series, No. 3074)
Banerji, Angana, 2002a, “Money Demand”, IMF Country Report No. 02/75 Russian Federation: Selected Issues and Statistical Appendix, April
Banerji, Angana, 2002b, “Banking Sector Reform”, IMF Country Report No. 02/75 Russian Federation: Selected Issues and Statistical Appendix, April, and FSSA.
Berge, Claes, 2000, “Inflation Forecast Targeting: The Swedish Experience” in Bléjer et al., “Inflation targeting in practice: Strategic and Operational Issues and Application to Emerging Market Economies”
Bléjer, Ize and A. Leone, 2000, “Inflation targeting in practice: Strategic and Operational Issues and Application to Emerging Market Economies”,
Debelle Guy, 2000, “Inflation Targeting and Output Stabilization in Australia” in Bléjer et al., “Inflation targeting in practice: Strategic and Operational Issues and Application to Emerging Market Economies”
International Monetary Fund, 2001, “Establishing the Preconditions for Inflation Targeting”, (Monetary and Exchange Affairs Department Operational Paper)
International Monetary Fund, 2000, “Practical Issues in the Adoption of Inflation Targeting by Emerging Market Countries” (SM/00/199)
Mourmouras,A., 2002, “Poland’s Inflation Targeting Performance: A Peer Group Perspective”, IMF Country Report No. 02/128, Republic of Poland: Selected Issues and Statistical Appendix, June
Lipschitz,L., et al., 2002, “Capital Flows to Transition Economies: The Dilemma for Stabilization Policy” (IMF Working Paper WP/02/11)
Longworth,D, 2000, “The Canadian Monetary Transmission Mechanism and Inflation Projections” in Bléjer et al., “Inflation targeting in practice: Strategic and Operational Issues and Application to Emerging Market Economies”
Morandé Felipe and Klaus Schmidt-Hebbel, 2000, “Monetary Policy and Inflation Targeting in Chile” in Bléjer et al., “Inflation targeting in practice: Strategic and Operational Issues and Application to Emerging Market Economies”
Leiderman Leonardo and Gil Bufman, 2000, “Inflation Targeting Under a Crawling Band Exchange Rate Regime: Lessons from Israel” in Bléjer et al., “Inflation targeting in practice: Strategic and Operational Issues and Application to Emerging Market Economies”
Research Department, Central Bank of Brazil, 2000, “Issues in the Adoption of an Inflation Targeting Framework in Brazil” in Bléjer et al., “Inflation targeting in practice: Strategic and Operational Issues and Application to Emerging Market Economies”
Prepared by Angaria Banerji (EU2).
See Chapter I.
Money and inflation targets have also been breached due to technical factors. First, an assessment of the strength of money demand has been complicated by the considerable uncertainty and frequent data revisions in estimated GDP growth and the structural break in an estimated money demand equation as a result of the 1998 crisis. Thus, to some extent, the higher than targeted money growth mainly reflects a stronger growth in money demand than originally anticipated. Second, due to a lack of coordination with the government, the CBR has been unable to take into account the effect of administered price adjustments when setting its inflation target. Third, liquidity management has been complicated by the inadequate coordination between the CBR and MOF regarding the timing and amount of budgetary spending which have been characterized by large surges at year-end. Finally, the lack of effective instruments of monetary policy (due, inter alia, to possible balance sheet constraints which have likely eased in recent years) have limited the CBR’s ability to effectively sterilize liquidity injections.
Deposit facility rates (1 and 2 week rates) were last increased in January, 2002; however, the increases were modest and the rates continued to remain negative in real terms.
In this context it must be noted that the CBR’s ability to sterilize large amounts of liquidity injections might, to some extent, be limited by its balance sheet constraints, although these constraints have likely eased in recent years.
In addition to headline inflation, from January 2003, Goskorostat has also started publishing estimates of core inflation on a monthly basis. The excluded items account for 17 percent of the total CPI basket.
Staff analysis (Chapter II) show that in Russia the nominal exchange rate pass-through to inflation varies between 0.5-0.7 percentage points for a 1 percent change in the nominal exchange rate and is transmitted within 2-3 quarters. The immediate impact of a depreciation of the nominal exchange rate on inflation is fast (transmitted within one quarter) and relatively high (roughly 0.3 percentage points).
IMF Resident Representative’s Office, Moscow (2002). Also available via the Internet: http://ww.imf.org/extemal/countrv/rus/rr/2Q02/pdf/111402.pdf
Chapter I explains why a faster pace of disinflation would be desirable.
An extreme form of this could be establishing a currency board.
Concerns about real GDP growth are usually reflected in the determination of the pace of disinflation.
Several resource-based countries (such as Norway, New Zealand, Canada, Chile and Australia) have adopted inflation targeting to anchor monetary policy. These regimes have allowed deviations from the targeted inflation in response to temporary supply sbocks (e.g., food and energy prices), indirect tax changes, and imputed rental costs.
In recent years, such interventions among inflation targeting countries have been practiced mainly by emerging market countries with thinly-traded currencies and greater susceptibility to disturbances emanating from the foreign exchange market.
There are a number of issues related to the inflation target itself where the role of the government would be very important (see paragraph 20).
The CBR’S profit increased from Rub 1.2 bn in 1999 to Rub 9 bn in 2002.
In February 2003, part of the government paper in the CBR’s securities’ portfolio was restructured into Rub 30 billion of marketable securities.
See Financial System Stability Assessment (2003).
A few countries, which are on their way to inflation targeting, used or still use a quantity guide (e.g., Peru) but they plan to move to a short-term interest rate-operating guide in the future.
Emerging market countries, however, tend to rely less on statistical models due to data shortfalls and ongoing structural changes (SWOO/199).
See Chapter II.
Even if they have successfully developed models, emerging market central banks must often rely on more qualitative information since these economies are typically subject to more uncertainties than those of industrial countries.