Enflasyon hedeflemesi: Dünya'da ve Türkiye'deki uygulamaları
Başlık çevirisi mevcut değil.
- Tez No: 106629
- Danışmanlar: DOÇ. DR. ERİŞAH ARICAN
- Tez Türü: Yüksek Lisans
- Konular: Ekonomi, Economics
- Anahtar Kelimeler: Enflasyon, Enflasyon hedeflemesi, Gelişmekte olan ülkeler, Merkez Bankası, Türkiye, Inflation, Inflation targeting, Developing countries, Central Bank, Türkiye
- Yıl: 2001
- Dil: Türkçe
- Üniversite: Marmara Üniversitesi
- Enstitü: Bankacılık ve Sigortacılık Enstitüsü
- Ana Bilim Dalı: Bankacılık Ana Bilim Dalı
- Bilim Dalı: Belirtilmemiş.
- Sayfa Sayısı: Belirtilmemiş.
Özet
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Özet (Çeviri)
ENGLISH SUMMARY INFLATION TARGETING: WORLD AND TURKISH EXPERIENCES The unhappy experience of Latin American and East Asian countries with pegged exchange rate regimes who subsequently found themselves in deep financial crises in the 1990s has led emerging market economies to search for alternative nominal anchors. Targeting inflation, a monetary policy strategy which has been successfully used by a number of industrialized countries, has thus become an incieasingly.attracfee alteriiatiye that has been, adopted,by a..grjpMİngjaurnbe^.pf.., emerging market countries, including Chile, Brazil, and Poland. In this paper, I outline what inflation targeting involves for these countries and discuss the advantages and disadvantages of this monetary policy strategy. The bottom line is that although inflation targeting is not a remedy for all troubles and may not be appropriate for many emerging market countries, it can be a highly useful monetary policy in a number of them. Conceptual Framework of Inflation Targeting Inflation targeting is a monetary policy strategy that encompasses five main elements: 1) the public announcement of medium-term numerical targets for inflation; 2) an institutional commitment to price stability as the primary goal of monetary policy, to which other goals are subordinated; 3) an information inclusive strategy in which many variables, and not just monetary aggregates or the exchange rate, are used for deciding the setting of policy instruments; 4) increased transparency of the monetary policy strategy through communication with the public and the markets about the plans, objectives, and decisions of the monetary authorities; and 5) increased accountability of the central bank for attaining its inflation objectives. The list should clarify one crucial point about inflation targeting: it entails much more than a public announcement of numerical targets for inflation for the year ahead. This is important in the context of emerging markets' countries because many of them routinely reported numerical inflation targets or objectives as part of the government's economic plan for the coming year, and yet their monetary policy strategy should not be characterized as inflation targeting, which requires the other four elements for it to be sustainable over the medium term. 123 iff «^« * as - \\Prerequisites and Defining Conditions of Inflation Targeting: Firstly, the central banks should have independence in the conduct of monetary policy. The independence here does not imply the full independence, but at least instrumental independence. The importance of this precondition increases when the developing countries considered. Actually, fiscal dominance and poor financial market structure constrain the scope for an independent monetary policy in these countries. A comprehensive reform program, which decreases the pressures of the public sector on the financial sector, and inflation to low levels, including banking sector regulations, is required in order to create the central bank independence in those countries. To meet this requirement, the fiscal policy should not have excess pressures on the monetary policy stance. That is,, the“> central banks do not have to conduct accommodative policies. The weights of public sector borrowing requirements on the financial system must not be so high and there should not be direct borrowing of public sector from the central bank and heavy reliance on the seignorage revenues by the public sector. If these conditions are not satisfied, then the inflation will have fiscal roots and fiscally driven inflation process undermines effectiveness of monetary policy. Although there is no any consensus about the threshold at which monetary policy loses its effectiveness, it is generally accepted that the 15-25 percent inflation for three or five consecutive years will decrease the ability of the central bank to be successful in targeting some variables and lasting reduction in the inflation on its own. Secondly, there should not be another targeted nominal variable like wages or nominal exchange rate for successful implementation of inflation targeting regime. When the central bank commits to fix the nominal exchange rate to the currency of the main trading partner, the policymaker accepts that the rate of inflation of the major trading partner is the targeted inflation rate. In this case, it is not possible to conduct monetary policy by targeting any other variables especially in the existence of the capital mobility. In the softer version of the exchange rate targeting regime, like crawling peg, it may be possible to pursue other nominal objectives. However, it may be problematic. When there is a conflict between the objectives, the priority will be given to which target? For successful implementation of inflation targeting, the priority must be given to inflation objective. But, it is not possible to explain the priorities of the policymaker to the public in a credible manner before that conflict arises. In that case, the public will make their own comments about the policy actions and there is no guarantee that the policy stance will give the exact signals about the actions and will cause true comments. In order to circumvent those problems, it would be better not to object other variables in the inflation targeting regimes. Thirdly, the presence of the lags in affecting the inflation by the monetary policy means that the optimal policy corresponds to inflation forecast targeting. 124 ^ ;*«Ü9JW(8*»JÎ!*Therefore, monetary authorities must be able to model inflation dynamics in the country and to forecast the inflation in inflation targeting regime and they should be certain about how monetary policy affects the macroeconomic variables, and about how the relative effectiveness of the policy instruments is. In order to implement an inflation targeting regime, a country that satisfies these above conditions should conduct a monetary policy, which has four basic elements. First of all, an explicit quantitative target must be announced for some periods. Secondly, the central bank has to show its intention that its most important objective is to enable an environment with stable prices to the public. Thirdly, the central bank should have powerful models, which reflects the. economic dynamicswell.^nd,makes the central bank.be able to, take pre-emptive, actions, when it is necessary. Finally, since the influence of the monetary policy on the macroeconomic variables can be seen with long and variable lags, the central bank must have forward-looking behaviors by using the inflation forecasts as intermediate target. Advantages of Inflation Targeting: The Inflation targeting regime has several advantages as a monetary policy strategy when compared with the other policy regimes. 1) Inflation targeting provides a nominal anchor for monetary policy and inflation expectations. 2) In contrast to the exchange rate targeting, Inflation targeting gives opportunity to respond shocks hitting to the economy and to focus domestic considerations 3) Inflation targeting does not require a stable relationship between monetary aggregates and inflation as in monetary targeting. It uses all available information in the formation of the policy setting. 4) As it is explained above, monetary policy shows its impact on the economic activity with long and variable lags, inflation targeting regime gives an explicit role to the lags of monetary policy in the choice of policy instruments. 5) İt İs possible in the inflation targeting regime to decrease the possibility of falling into time inconsistency trap by decreasing the pressure coming from the politicians in order to stimulate the economic activity. 6) The other advantage of the inflation targeting regime is its great emphasis on the regular communication with the public and transparency. This property have important role in the success of the Inflation targeting in the industrialized 125 VV \fitf / \countries. The policymakers in the developed countries use every opportunity to communicate with the public like public speeches and a step further by means of inflation reports. 7) Transparency of the policy has inclination to make the policy more accountable to the public and continuous success of the policy in reaching the numerical targets increases the public support for the central bank. 8) One of the advantages of inflation targeting regime is its clarity for public understanding compared with the nominal income targeting. In the nominal income-targeting regime, there is no decomposition for the income component and price component, So* it might be difficult for the public,,to..built, price» expectations. In addition, the inflation-targeting regime serves as an anchor for wage and the price setters and the existence of such an anchor increases the credibility of the policy. After a shock hits the economy, the necessary action of the central bank must be taken to offset the impact of the shock decreases. Disadvantages of Inflation Targeting: 1) The inflation-targeting regime has been criticized due to its overemphasis on inflation, its rigid structure, its negative impacts on the economic growth and its exclusion other goals like output stabilization.However, the countries' announcement of the targets above the zero inflation rates reflects the fact that the central banks does not ignore the output growths totally and it takes into account a possible deflation and the undesirable impacts of deflation on the economic activity. 2) It is claimed that there is only weak central bank accountability in inflation targeting because in contrast to exchange rate and monetary aggregates inflation is difficult to control and the policy instruments show their impact on inflation with long and variable lags. This problem is especially severe in the developing countries when the rates of inflation are being brought down from high levels. In this situation, there will be large forecast errors and frequent target misses. Therefore, it will be difficult for the central bank to explain the reason for the deviations from the target and to gain credibility, which is central to the inflation targeting regime. Inflation targeting will be more effective if it is started to implement this regime after successful disinflation. It is what Chile did. Another factor that has influence on the ability of the central banks to control inflation is the large existence of the government-controlled prices and this factor is of significant importance for the developing countries. Successful inflation targeting implementation requires high coordination between the people who determine these prices and the monetary policymakers or the exclusion of these prices from the targeted rate in this circumstance. Moreover, inflation forecasting procedure in 126 Jtr&%^4?these countries should take into account the timing and magnitude of the changes in those prices. 3) Inflation targeting may not prevent fiscal dominance. In the long run, large fiscal deficits will cause either monetization of the deficits or devaluation and they will result in high inflation. 4) Exchange rate flexibility required by inflation targeting might cause financial instability. 5) There are some economists who argue that the inflation targeting regime is too discretionary, -and. it may.,cause policy makers to...follow overly expansionary ”policies. However, as it is explained in this paper, inflation targeting regime increases the accountability and transparency of the policy. Accountability increases the costs of policy mistakes for policy makers and transparency makes difficult to conduct overly expansionary policy without it being noticed. So, it does not seem plausible to assert that the monetary policy in the inflation targeting regime is too discretionary. 6) Some economists argue that inflation targeting is too rigid and it impedes the monetary authorities from responding to the shocks hitting the economy. However, it can be argued that inflation targeting is far from being a rigid rule; it can be evaluated as 'constraint discretion'. It does not impose simple rules about the conduct of the monetary policy. Contrary to simple rules, inflation targeting regime obligates policy makers to use all available information in order to achieve the target. Inflation Targeting in Developed Countries: At the beginning of the 1990' s, some countries like New Zealand, Canada, The United Kingdom, Finland, Sweden, Australia and Spain, started to implement the inflation-targeting regime. The inflation targeting implementation in these countries has some common features, which must be stressed here. - In these countries, there was high degree of the exchange rate flexibility. Actually, some of the countries like the UK, Sweden, and Finland, had started to implement the inflation targeting- regime after title failure of exchange rate targeting as a main anchor of the monetary policy. - The countries adopted inflation targeting, had the central bank independence at least in terms of the instrument independence and absence of fiscal dominance. 127- The central banks of these countries used the short-term interest rates as an instrument in their operations and they have well developed financial markets, which transmits effects of the policy actions to aggregate demand and inflation. - The targets are set in the forward-looking manner in order to offset the effects of foreseeable shocks on the inflation. - In the developed countries inflation targeting was used in order to built the credibility of the macroeconomic policy. In some countries, the targets were announced jointly by ministry of finance and the governor of the central bank and it eliminates the idea that there may be conflicts between the objectives of the economic policy -objectives. The continuous communication,.with.. the public through the speeches and some publication like to inflation reports explain to the public what are the aims of the monetary policy implementation. When the inflation targeting framework is credible, it is possible to affect the expectations of the public. - The regime did not implemented in the high inflation environments, but low inflation environments, less than 10 percent and it helped to build the initial credibility in the first phases of the implementation. Inflation Targeting in Developing Countries: The important question, which can be asked at this stage, is whether inflation targeting regime can be implemented in the developing countries, whether the necessary conditions for its success are satisfied or not. The major determinants of the independent monetary policy are that the degree of the fiscal dominance, and the absence of any firm commitment to target other nominal variables like exchange rates or monetary aggregates that might create some conflicts with the inflation objectives. In some of the developing countries it is readily apparent that these prerequisites are not satisfied. In countries experiencing high inflation, above 30- 40 percent per year for a number of years, the nominal variables will tend to show high degree of inertia and the monetary policy will be accommodative. In these conditions, the effects of monetary policy on inflation will be unpredictable and short-lived. The most important step to be taken by the policymaker here is to decrease the inflation rates continuously, which requires to implement a stabilization program by decreasing the role of the central banks in the finance of the government deficits, to use some nominal anchors in order to shape the inflation expectations, consistent with the inflation objectives. 128 ?d w* «&' P \\ 1'“-* ?*** '-?? - iHowever, for some developing countries, it is difficult to assess whether they satisfy these prerequisites or not. Fiscal dominance does not always result in high inflation, the extent to which monetary policy accommodates the other variables and the nature of the shocks in the economy depends on a lot of country specific factors and the implementation of middle road exchange rate regimes like managed float and crawling peg systems gives discretion to the monetary authorities in ranking their external and domestic objectives in less-than-fuUy transparent manner. It is difficult for developing countries to claim that these countries have the same environment with the developed countries in terms of central bank independence. Central.bank^ scope. for maronduct of independent, monetary policyis hindered, by the presence of the three related factors in those countries: heavy reliance of the seignorage, shallow capital markets, fragile banking systems. The reliance on seignorage, which is the most common indicator of the fiscal dominance, is much heavier in developing countries than in the developed countries due to a number of structural factors such as unstable tax revenues, poor tax collection procedures, skewed income distributions, political instability. In addition to these factors, it is claimed that in these countries there is a tendency to abuse this source of revenue in the crisis times. The other indicator of fiscal dominance in these countries is the existence of shallow capital markets. A two-way relationship can be seen here. Sometimes, the undeveloped capital markets are the reasons for the fiscal dominance and sometimes the fiscal dominance is the reason for the undeveloped capital markets. The financial repressions to extract revenues from the financial system through the high reserve requirements, implementation of the sectoral credit policies and the compulsory requirements of the public debt and the interest rates ceiling can be seen as an example of the fiscal dominance as being the reason for the undeveloped capital markets. On the other hand, in some instances, the access of the developing countries to the international capital markets is very low, the general wealth level is low compared with the developed countries and the degree of fiscal flexibility is low and these cause the government to rely on the seignorage revenues and other forms of repression in order to close the transitory gap between its revenue and the expenditure flows. A fragile banking system is another consequence of the long financial repression periods. After the financial sector reforms, banking sector introduce an independent influence on the conduct of monetary policy. The conflict between the objectives of price stability and attaining and preserving banking sector profitability is important in this context. Therefore, it is important for central banks to rank policy objectives.. <i. V ft * } : If » ”.*/ 129 Vfe iV/3#Recent Country Experiences: The earliest example of an emerging market country adopting inflation targeting is Chile, which in 1990, with the inflation rate in excess of 20%, first started to announce an inflation objective in September for the twelve-month inflation rate ending in December of the following year. As pointed out above, for inflation targeting to be a success, institutions in the country must support independence of the central bank, as well as a strong fiscal position and sound financial system. Before embarking on inflation targeting, Chile passed new central bank legislation in 1989 (that took effect in 1990), which gave independence to the central bank and mandated price stability as one of its primary objectives.A sound fiscal policy was also in. place,,, with, the fiscal balance in surplus in every year, from. 19SULİO,. 1997. In addition, due largely to the measures taken in the aftermath of its severe banking crisis in the early 1980s, Chile's standards and practices in the areas of banking regulation and supervision were of a quality comparable to those found in industrialized countries. Chile's central bank was well aware of the difficulty of controlling inflation and precisely hitting the target when inflation was in the double digits, and it dealt with this problem in several ways. First, like the industrialized countries that have adopted inflation targeting, Chile phased in inflation targeting gradually after initial successes in lowering inflation. When the inflation objective was first announced in September 1990, it was interpreted more as official inflation projections rather than as formal or“hard”targets. Only after the central bank experienced success in both meeting the inflation objectives and lowering inflation, did it begin to emphasize that the inflation objectives should be interpreted as hard targets for which the central bank would be accountable. Second, Chile's central bank pursued a very gradualist approach to lowering its inflation objectives, starting with targets of over 20% for 1991 and lowering them slowly to 3.5% by the end of the decade. Third, because of the difficulty of controlling inflation at inflation rates which were still above 10%, a realistic range for the inflation outcomes would have been very large. Thus, as part of the process of hardening the inflation targets, the Chile's central bank switched from target ranges to point targets with its announcement in September 1.994 for the 1995 objective. The Chilean experience with inflation targeting looks quite successful: Inflation fell from levels above 20%, when inflation projections were first introduced, to a level around 3% at present. Over the same period, output growth was very high, averaging more than 8% per year from 1991 to 1997, a level comparable to those exhibited by the (former) Asian tigers. Only in the last two years has the economy entered a recession with output growth falling to 3.4% in 1998 and to a -2.9% rate for the first half of 1999. In 1998 the Chilean central bank was reluctany@^sç' '\ 130monetary policy and let the exchange rate depreciate in order to cushion the effects of a large, negative terms of trade shock. Instead, the Chilean central bank raised interest rates and even narrowed the exchange rate band. In hindsight, these decisions appear to have been a mistake: the inflation target was undershot and the economy entered a recession for the first time in more than 15 years. Not surprisingly, the central bank came under increased criticism and in 1999 reversed course, by lowering interest rates and allowing the peso to depreciate. The Chilean example suggests that inflation targeting can be used as a successful strategy for gradual disinflation in emerging market countries, even when initial inflation is on the order of 20%. It is important to emphasize that the success of inflation, targeting cannot be, solely attributed to the actions of the, Chilean.central,. bank: supportive policies such as absence of large fiscal deficits and rigorous regulation and supervision of the financial sector have been crucial to its success.3 Another important element of Chile's strategy has been a gradual hardening of the targets over time. However, the experience in Chile of the last two years, as well as that of industrialized countries, indicates that a key requirement for- successful inflation-targeting regimes in emerging market economies is the recognition that undershooting inflation targets is just as costly as overshooting the targets. Support for an independent central bank which is pursuing price stability can erode if the central bank is perceived as focusing solely on lowering inflation to the detriment of other objectives such as minimizing output variability. In addition, Chile has not yet fully accomplished a full-fledged, inflation targeting regime. The Chilean central bank has not yet produced an Inflation Report- type of document, nor does it publish inflation forecasts; the accountability mechanisms of monetary policy are also weak. Brazil, on the other hand, which adopted inflation targeting in the wake of its currency crisis in early 1999, shows that a full-fledged inflation targeting regime can be put in place remarkably quickly. Within four months of the announcement by the newly appointed central bank president that inflation targeting would be adopted, the central bank of Brazil implemented an inflation targeting regime with all the“bells and whistles”found in inflation targeters in industrialized countries, including an Inflation Report with published inflation forecasts. Despite the initial success of Brazilian inflation targeting which has kept inflation below 10% despite a substantial exchange-rate depreciation, there are still serious doubts about whether it will be ultimately successful because it is by no means clear whether Brazil can solve its*' deep-rooted fiscal problems. 131Inflation Targeting Implementation for Turkey: The first requirement for inflation targeting is that Central Banks should have considerable independence. This implies that there should be no indication of fiscal dominance in conducting monetary policy, i.e. the Central Bank should not subordinate its monetary policy to inefficiencies of the fiscal policy. Public sector borrowing from The Central Bank should be almost nonexistent, financial markets should be deep enough for Treasury to borrow and roll over its debt and its inability to borrow from the markets should not constrain monetary policy. The second requirement is that authorities should refrain from targeting the level - or me.path~olany-other,v.ariable such. as exchange rate since, such, coexistence, would create problems and most likely will result in credibility loss. An important point to consider is that inflation targeting is introduced when inflation is already very low -less than 10 percent. Hence Brazil or Korea can use inflation targeting but it is hardly the case for Turkey given inflation expectations of at least 50%. It should also be kept in mind that, the disinflation program of 2000 was the only serious program Turkey had, to control inflation and there is no country who succeeded with just one program in reducing inflation. The experiences of Mexico, Brazil, Israel etc. indicate that it is a painful and bumpy road and it may take up to 10 years to reduce inflation and many stabilization and disinflation programs. So for the time being, till the banking sector's restructuring problems and the public bank's duty loss problems are resolved, preferably with international rescue packages as was in the case of Korea and Mexico, together with serious credible steps taken for fiscal discipline, (it was this combination which reduced inflation expectations in all cases), The Central Bank will have to continue its tight monetary policy and continue reserve money targeting (reserve money is cointegrated with inflation in the long run) as was the case before the implementation of disinflation program. In this respect, the monetary policy reaction function estimated for The Central Bank, where net domestic assets change in response to increases or decreases in capital inflows, to rate of depreciation of real exchange rate as well as to deviation of domestic interest rates from foreign rates, will still be valid in stabilizing the financial markets first, then to keep the reserve money growth within desired levels.In the aftermath of the financial crisis, injecting liquidity to the distressed banks in the face of declining net foreign assets, would- increase-net domestic assets which would require sterilization and that would mean additional quasi fiscal cost as was calculated in that paper. However, given the uncertainty we are facing, till bank restructuring and sound macro policies are put into effect, at the moment, it seems that raising the interest rates above devaluation expectations, intervention in the foreign exchange market when necessary and sterilization is the only reasonable course of action to follow. <=T k' r 132..îr^iMi.' ? Conclusion As noted, a critical issue for inflation targeting in emerging market countries is the role of the exchange rate. Emerging market countries, including those engaging in inflation targeting, have rightfully been reluctant to adopt an attitude of“benign neglect”of exchange rate movements partly because of the existence of a sizable stock of foreign currency and a high degree of dollarization. Nonetheless, emerging market countries probably have gone too far for too long in the direction of limiting exchange rate flexibility-not only through the explicit use of exchange rate bands, but also through frequent intervention in the foreign exchange market. Responding too heavily and too frequently to movements in a“flexible”exchange - rate jms-the risk o£ transfcrating the exchange rate into a nominal.anchor ior - monetary policy that takes precedence over the inflation target, at least in the eyes of the public.One possible way to avoid this problem is for inflation-targeting central banks in emerging market countries to adopt a transparent policy of smoothing short-run exchange-rate fluctuations that helps mitigate potentially destabilizing effects of abrupt exchange rate changes while making it clear to the public that they will allow exchange rates to reach their market-determined level over longer horizons. It might be claimed that it is too early for some developing countries to implement Inflation targeting regime in order to improve monetary and inflation performance of these countries, although the country cases examined showed us that inflation targeting regime could also have successful results in the developing countries. The main reason behind this success may be various. In the Chilean case, the reason behind this success can be the absence of fiscal deficits, the rigorous regulations and supervision of financial system and gradual hardening of the targets. In Israel experience, the success is directly related to the credibility gained by preemptive actions taken by the authorities in case a deviation from the target is foreseen. In Poland case, although inflation targeting seems on track with considerable change of economic situation, it is early to make a judgment about its success. 133 *E-
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