Inflation Targeting in Georgia: Are We There Yet?, Issues 2007-2193
International Monetary Fund, Middle East and Central Asia Department, Aug 1, 2007 - Inflation (Finance) - 33 pages
This paper evaluates whether Georgia is ready to adopt inflation targeting (IT), a monetary policy framework that several emerging markets have adopted recently. After reviewing selected prerequisites for successfully implementing IT, the paper focuses on whether one specific precondition is in place-an empirically stable monetary transmission mechanism. Building on a baseline VAR model, it presents several extensions to explore the various channels using causality tests, impulse responses, and variance decompositions. The paper finds that once the central bank overcomes some institutional and operational weaknesses and establishes a more reliable transmission mechanism, it could adopt IT over the medium term.
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Baseline VAR and Private Credit
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Inflation Targeting in Georgia: Are We There Yet? (EPub)
Giorgi Bakradze,Mr. Andreas Billmeier
Limited preview - 2007
aggregate demand bank lending channel cash in circulation central bank Cholesky one standard circulation reserves rate Circulation Response commercial banks consistent core inflation CPI inflation currency in circulation Currency International Exchange Dabla-Norris Effective Exchange Rate error in circulation Exchange Rate Channel exogenous variables Figure foreign exchange market framework Granger Causality Tests Impulse Responses inflation forecasting model inflation targeting interbank rate interest rate channel International Exchange error international reserves lari lending rate Main Directions monetary aggregates monetary policymaking monetary stance monetary transmission mechanism NBG law NBG's inflation Nominal Effective Exchange Output Prices Currency Output to Currency percent price level price stability Prices Currency International Prices to Shock Quarters Standard Output Real Effective Exchange Reserve money growth Response of Output Response of Prices Response to Cholesky roeuueip iipejo roro shock in International shock to currency significant standard deviation innovations Standard Output Prices U.S. dollar Variance decomposition Wald test