Inflation targeting, exchange rate pass-through and fear of floating

Arbeitspapier

The paper presents evidence on exchange rate pass-through and the Fear of Floating hypothesis before and after Inflation Targeting for a set of developed and emerging market economies. We use a structural VAR model to estimate the effect of depreciations on prices. The results support the view of the previous literature that the pass-through is higher for emerging than for developed economies, and that it has decreased after the adoption of Inflation Targeting. We then use several different methodologies to examine the existence of Fear of Floating practices. We observe a drastic reduction in direct foreign exchange market intervention after the adoption of Inflation Targeting. As the exchange rate pass-through still matters for the attainment of the inflation targets, Fear of Floating seems to play only a minor role for most economies in our sample.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Department of Economics Discussion Paper ; No. 06,05

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Monetary Policy ; Foreign Exchange ; Open Economy Macroeconomics
• Subject: Inflation Targeting ; Exchange Rate Pass-Through ; 'Fear of Floating'

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nogueira, Reginaldo Pinto
• Event: Veröffentlichung
• (who): University of Kent, Department of Economics
• (where): Canterbury
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/68139
• Last update: 10.03.2025, 11:43 AM CET