monetary policy transmission and targeting … policy transmission and targeting mechanisms in the...

Monetary Policy Transmission and Monetary Policy Transmission and Targeting Mechanisms in the MENA Targeting Mechanisms in the MENA

RegionRegion

Simon Simon NeaimeNeaimeProfessorProfessor and Chairand Chair

Department of EconomicsDepartment of EconomicsAmerican University of BeirutAmerican University of Beirut

P.O. Box 11P.O. Box 11--02360236BeirutBeirut--LebanonLebanon

OutlineOutline

1.Introduction1.Introduction2.Motivation2.Motivation3.Literature Review3.Literature Review4.Methodology4.Methodology5.Empirical Results5.Empirical Results6.Conclusion and Policy Implications6.Conclusion and Policy Implications

1.Introduction1.IntroductionIn early 1990In early 1990’’s some industrialized economies shifted to a s some industrialized economies shifted to a framework for implementing monetary policy known as inflation framework for implementing monetary policy known as inflation targeting targeting

Move was a way to improve their record of controlling inflation Move was a way to improve their record of controlling inflation and to and to make their monetary policies more transparent and effectivemake their monetary policies more transparent and effective

Given the very encouraging experience of developed countries, a Given the very encouraging experience of developed countries, a number of MENA countries decided to adopt inflation targeting einumber of MENA countries decided to adopt inflation targeting either ther as an explicit or implicit monetary policy objective as an explicit or implicit monetary policy objective

Two countries that have explicitly adopted inflation targeting aTwo countries that have explicitly adopted inflation targeting as their s their main policy goal, are Egypt and Turkeymain policy goal, are Egypt and Turkey

Turkey has been working for the past few years on the inflationTurkey has been working for the past few years on the inflation--targeting regimetargeting regime

Recently, the central bank became independent from the Recently, the central bank became independent from the government, with an explicit price stability objective and a flogovernment, with an explicit price stability objective and a floating ating exchange rate exchange rate

EgyptEgypt shifted to a monetary policy framework that focuses on price shifted to a monetary policy framework that focuses on price stability with a flexible exchange rate regime since 2002stability with a flexible exchange rate regime since 2002

Lebanon is a highly indebted and Lebanon is a highly indebted and dollarizeddollarized economy characterized economy characterized with a high inflation historywith a high inflation history

Since 1993, the Central Bank has pegged the exchange rate to theSince 1993, the Central Bank has pegged the exchange rate to theUS DollarUS Dollar

Introduction ContIntroduction Cont’’dd

Morocco and Tunisia are implicitly targeting Morocco and Tunisia are implicitly targeting inflation, and are gradually moving towards an inflation, and are gradually moving towards an inflation targeting regimeinflation targeting regime

They are already targeting the real exchange They are already targeting the real exchange rate rather than the nominal rate in order to rate rather than the nominal rate in order to enhance competitiveness and avoid currency enhance competitiveness and avoid currency overvaluationovervaluation

Monetary policy in JordanMonetary policy in Jordan is officially geared is officially geared towards maintaining a fixed exchangetowards maintaining a fixed exchange--rate peg rate peg to the US Dollar to the US Dollar

Introduction ContIntroduction Cont’’dd

InflationInflation--prone MENA economies have often used a nominal prone MENA economies have often used a nominal exchange rate anchor as a mean of achieving inflation exchange rate anchor as a mean of achieving inflation convergenceconvergence

Even though this policy has helped them reduce inflation Even though this policy has helped them reduce inflation substantially relative to low inflation countries, it has also substantially relative to low inflation countries, it has also generatedgenerated

1.1. Persistent real exchange rate appreciation Persistent real exchange rate appreciation 2.2. Losses in international competitiveness Losses in international competitiveness 3.3. Large trade and budget deficitsLarge trade and budget deficits

Targeting inflation has thus become an increasingly attractive Targeting inflation has thus become an increasingly attractive alternative that has been adopted by a growing number of alternative that has been adopted by a growing number of emerging market countries, including Chile, Brazil, the Czech emerging market countries, including Chile, Brazil, the Czech Republic, Poland, and more recently by the MENA countries of Republic, Poland, and more recently by the MENA countries of Turkey and EgyptTurkey and Egypt

2.Motivation2.Motivation

This paper adds to the limited existing literature on the This paper adds to the limited existing literature on the MENA region by examining and for the first time MENA region by examining and for the first time empirically, using VAR and Impulse Response Functions empirically, using VAR and Impulse Response Functions (IRF)(IRF)

(1) Prospects of adopting an inflation targeting (1) Prospects of adopting an inflation targeting regimeregime

(2) Transmission mechanism of monetary policy (2) Transmission mechanism of monetary policy within the MENA regionwithin the MENA region

(3) How successful have Egypt and Turkey been in (3) How successful have Egypt and Turkey been in making a smooth transition to inflation targetingmaking a smooth transition to inflation targeting

Motivation ContMotivation Cont’’dd

A large and growing literature dealing with A large and growing literature dealing with inflation as target of monetary policyinflation as target of monetary policy

Sims (Sims (EE, 1980):, 1980): pioneered the VAR approach to pioneered the VAR approach to economic fluctuations which has been widely economic fluctuations which has been widely used in the empirical literature toused in the empirical literature to

(1) Analyze the transmission mechanism of (1) Analyze the transmission mechanism of monetary policy in developed economies monetary policy in developed economies

(2) Assess the success of the conduct of (2) Assess the success of the conduct of monetary policy and the choice of instruments monetary policy and the choice of instruments and targets and targets

3.Literature Review3.Literature Review

Gottschalk and Moore (Gottschalk and Moore (JCE,JCE, 2001):2001): Study the linkages between Study the linkages between policy variables and inflation outcomes. Their paper finds that policy variables and inflation outcomes. Their paper finds that the the exchange rate played a dominant role as a policy instrument in texchange rate played a dominant role as a policy instrument in the he 19901990’’s s

MishkinMishkin ((AERAER, 2000):, 2000): Discusses the advantages and Discusses the advantages and disadvantages of inflation targeting for emerging countries as adisadvantages of inflation targeting for emerging countries as amonetary policy strategy. He shows that inflation targeting may monetary policy strategy. He shows that inflation targeting may be a be a highly useful monetary policy strategy in a number of themhighly useful monetary policy strategy in a number of them

ErolErol and Van and Van WijnbergenWijnbergen ((WDWD, 1997):, 1997): Investigate the conflict Investigate the conflict among objectives under a real exchange rate policy. Their empiriamong objectives under a real exchange rate policy. Their empirical cal analysis draws on the Turkish case where they concludeanalysis draws on the Turkish case where they conclude

(1) Real exchange rate appreciation is found to be (1) Real exchange rate appreciation is found to be contractionarycontractionary

(2) Exchange rate policy can provide an anchor for price stabili(2) Exchange rate policy can provide an anchor for price stability ty only if it is credible only if it is credible

Literature Review ContLiterature Review Cont’’dd

DisyatatDisyatat et alet al ((JAEJAE, 2003):, 2003): Study the monetary Study the monetary transmission mechanism in Thailand using a transmission mechanism in Thailand using a VAR model VAR model

Qin, Qin, et al et al ((JPEJPE, 2005):, 2005): Present an empirical Present an empirical investigation of how monetary policy has been investigation of how monetary policy has been transmitted into the macro economy of China. transmitted into the macro economy of China. Econometric VAR modeling reveals that interest Econometric VAR modeling reveals that interest rates are the most effective instruments in rates are the most effective instruments in affecting pricesaffecting prices

BeetsmaBeetsma et alet al ((JEDCJEDC, 1996):, 1996): Explore how Explore how monetary policy set by the central bank interacts monetary policy set by the central bank interacts with public debt policy determined by fiscal with public debt policy determined by fiscal authorityauthority

Literature Review ContLiterature Review Cont’’dd

4.Empirical Methodology4.Empirical Methodology

VAR models are widely used in the VAR models are widely used in the econometrics literature because they sidestep econometrics literature because they sidestep the need for structural modelingthe need for structural modeling

Since only lagged values of the endogenous Since only lagged values of the endogenous variables appear on the right hand side of each variables appear on the right hand side of each equation, there is no issue of simultaneity, and equation, there is no issue of simultaneity, and Ordinary Least Squares (OLS) is the appropriate Ordinary Least Squares (OLS) is the appropriate estimation techniqueestimation technique

The four equations VAR model with one lag for the individual The four equations VAR model with one lag for the individual MENA country is given byMENA country is given by

(1)(1)

(2)(2)

(3)(3)

(4)(4)

Empirical Methodology ContEmpirical Methodology Cont’’dd

ttititititi TBERCPIYY ,11,41,31,21,1, εααααα +++++= −−−−

ttititititi TBERYCPICPI ,21,41,31,21,1, εβββββ +++++= −−−−

ttititititi TBCPIYERER ,31,41,31,21,1, εδδδδδ +++++= −−−−

ttititititi ERCPIYTBTB ,41,41,31,21,1, ελλλλλ +++++= −−−−

The VAR model (1)The VAR model (1)--(4) may be written in Matrix form as follow (4) may be written in Matrix form as follow (5)(5)

Where Where ZZtt is an m by 1 vector of variables in the system at time is an m by 1 vector of variables in the system at time tt, , are m by m matrix of coefficients, and is an are m by m matrix of coefficients, and is an

m by 1 vector of structural shocks with the variancem by 1 vector of structural shocks with the variance--covariance covariance matrix matrix

The VAR estimates (5) in the reduced formThe VAR estimates (5) in the reduced form

(6)(6)

where where utut is the m by 1 vector of residuals with varianceis the m by 1 vector of residuals with variance--covariance covariance

matrixmatrix


tqtqttt ZZZZ ηβββ ++++= −− ...110

,,...,0 qjforj =β tη

ρηη =)( 'ttE

tqtqtt ZZZ υαα +++= −− ...11

ωυυ =)( 'ttE

Defining implies that Defining implies that

Structural shocks and the reducedStructural shocks and the reduced--form residuals are form residuals are thus related by so that thus related by so that

To obtain the impulse response functions, we write To obtain the impulse response functions, we write equations (5) and (6) respectively asequations (5) and (6) respectively as

(7)(7) and (8)and (8)

Impulse response to structural shocks can be obtained Impulse response to structural shocks can be obtained from (7) and (8) using the relationfrom (7) and (8) using the relation

(9)(9)

( ) 100

−−= βρα


qjforji .....00 == βαα

tt ηαυ 0= 00 'ααω =

tt LZ ηβρ 1)]([ −−= tt LZ υαρ 1)]([ −−=

11 )]([)]([ −− −=− LL αρβρ

Sample of MENA countries: Egypt, Jordan, Sample of MENA countries: Egypt, Jordan, Lebanon, Morocco, Tunisia, and Turkey Lebanon, Morocco, Tunisia, and Turkey

--MonetaryMonetary Policy VariablesPolicy Variables: Nominal exchange : Nominal exchange rate (ER) and the threerate (ER) and the three--month Treasury Bill (TB) month Treasury Bill (TB) raterate

--Country Specific Macro Variables: Country Specific Macro Variables: Output Output variable: Gross Domestic Product (GDP) and variable: Gross Domestic Product (GDP) and Price variablePrice variable: the Consumer Price Index (CPI) : the Consumer Price Index (CPI)

We are mainly interested in the effects of shocks We are mainly interested in the effects of shocks to interest and exchange rates i.e., the monetary to interest and exchange rates i.e., the monetary policy variables on GDP and inflation policy variables on GDP and inflation


All variables, except the interest rate, enter the All variables, except the interest rate, enter the VAR Model in logs VAR Model in logs

In addition, an intervention dummy variable is In addition, an intervention dummy variable is introduced to remove the effect of exchange rate introduced to remove the effect of exchange rate turbulence of the early 1990turbulence of the early 1990’’s in Egypt, Jordan s in Egypt, Jordan Turkey and Lebanon Turkey and Lebanon

The estimation is carried out using quarterly, The estimation is carried out using quarterly, seasonally adjusted data from 1990Q1 to seasonally adjusted data from 1990Q1 to 2006Q4 2006Q4


5.Empirical Results5.Empirical Results

For the MENA countries with evidence of For the MENA countries with evidence of no no cointegrationcointegration between the individual between the individual series, the VAR model is estimated with series, the VAR model is estimated with the variables taken in first differences: the variables taken in first differences: Egypt, Jordan, Lebanon & TurkeyEgypt, Jordan, Lebanon & Turkey

For For cointegratedcointegrated country series a VECM is country series a VECM is estimated: Morocco & Tunisiaestimated: Morocco & Tunisia

a. Egypta. Egypt

Prices respond quite quickly to an appreciation of the exchange Prices respond quite quickly to an appreciation of the exchange rate rate This is expected since in the small open economy of Egypt, priceThis is expected since in the small open economy of Egypt, prices of s of traded goods return rapidly to world levels following an exchangtraded goods return rapidly to world levels following an exchange e rate appreciation rate appreciation The interest rate falls in response to the appreciation of the The interest rate falls in response to the appreciation of the exchange rateexchange rateSuggesting that the central bank attempts to offset further exchSuggesting that the central bank attempts to offset further exchange ange rate appreciation, and to ease up the pressure of higher interesrate appreciation, and to ease up the pressure of higher interest t rates on GDPrates on GDPThat is by lowering the interest rate, the monetary authority hoThat is by lowering the interest rate, the monetary authority hopes to pes to revert any inflow of capital and decrease the pressure on the revert any inflow of capital and decrease the pressure on the Egyptian PoundEgyptian Pound

Shifting towards an inflation target has resulted inShifting towards an inflation target has resulted in

Inflation has come down significantly giving way to a new era ofInflation has come down significantly giving way to a new era ofprice stability price stability Recessions have become less frequent and milder and economic Recessions have become less frequent and milder and economic expansions have been sustained and enhancedexpansions have been sustained and enhancedFuture success of the inflation targeting policy will depend on Future success of the inflation targeting policy will depend on the the ability of the central bank to isolate the real side of the econability of the central bank to isolate the real side of the economy omy from nominal domestic and foreign shocks from nominal domestic and foreign shocks

Empirical Results ContEmpirical Results Cont’’dd


b. Jordanb. Jordan

JordanJordan’’s GDP, prices and interest rates are insignificantly affected bys GDP, prices and interest rates are insignificantly affected by an an exchange rate shock. This is expected since Jordan has pursued aexchange rate shock. This is expected since Jordan has pursued a rigid rigid monetary policy of nominal exchange rate targeting monetary policy of nominal exchange rate targeting

Central bank will not attempt to offset some of the tightening iCentral bank will not attempt to offset some of the tightening in the n the monetary conditions monetary conditions

However, GDP appears to be significantly affected by interest raHowever, GDP appears to be significantly affected by interest ratestes

As Jordan proceeds with the liberalization of its trade and capiAs Jordan proceeds with the liberalization of its trade and capital account, tal account, the pursuit of fixed exchange rates will render monetary policy the pursuit of fixed exchange rates will render monetary policy even more even more ineffectiveineffective

To shift to targeting inflation, Jordan will have to allow more To shift to targeting inflation, Jordan will have to allow more independence independence of its central bank, and introduce some flexibility in the exchaof its central bank, and introduce some flexibility in the exchange rate nge rate

However, the Jordanian However, the Jordanian DinarDinar has been effectively pegged to the US dollar has been effectively pegged to the US dollar since the early 1990since the early 1990’’s. This strategy has played a key role in attracting s. This strategy has played a key role in attracting foreign capital. The exchange rate peg has been supported by relforeign capital. The exchange rate peg has been supported by relatively atively high international reserveshigh international reserves



c. Lebanonc. Lebanon

LebanonLebanon’’s CPI is significantly affected by an exchange rate shocks CPI is significantly affected by an exchange rate shock

Exchange rate is not effective with respect to GDP and interest Exchange rate is not effective with respect to GDP and interest rates rates

However, the exchange rate appreciates significantly as a resultHowever, the exchange rate appreciates significantly as a result of of an increase in interest rates. This is expected since the centraan increase in interest rates. This is expected since the central bank l bank has been using the TB rate to stabilize the domestic currencyhas been using the TB rate to stabilize the domestic currency

BDL succeeded so far in managing the budget deficit while BDL succeeded so far in managing the budget deficit while maintaining exchange rate stability. Through the use of the TB rmaintaining exchange rate stability. Through the use of the TB rate ate and the management of foreign exchange reserves, the central banand the management of foreign exchange reserves, the central bank k was able to achieve its intended objective: exchange rate stabilwas able to achieve its intended objective: exchange rate stability ity

To shift to a monetary policy that targets the inflation rate, BTo shift to a monetary policy that targets the inflation rate, BDL will DL will have to quit targeting the nominal exchange rate have to quit targeting the nominal exchange rate

This, however, can only be achieved after the fiscal situation iThis, however, can only be achieved after the fiscal situation is put s put back on a sustainable pathback on a sustainable path



d. Moroccod. Morocco

Prices respond quickly to an appreciation of the exchange ratePrices respond quickly to an appreciation of the exchange rate

Persistent and significant interest rate fall in response to thPersistent and significant interest rate fall in response to the e exchange rate appreciation. Suggesting that the central bank exchange rate appreciation. Suggesting that the central bank attempts to offset some of the tightening in the monetary conditattempts to offset some of the tightening in the monetary conditions ions to preclude further appreciations of the exchange rateto preclude further appreciations of the exchange rate

Prices and GDP decrease significantly as a result of an interestPrices and GDP decrease significantly as a result of an interest rate rate shockshock

If the interest rate channel plays an important role, a substantIf the interest rate channel plays an important role, a substantial part ial part of the adjustment burden will fall on the growth rate of real GDof the adjustment burden will fall on the growth rate of real GDP P

WWith further balance of payments liberalization, the monetary ith further balance of payments liberalization, the monetary authority may be compelled to introduce further flexibility in tauthority may be compelled to introduce further flexibility in the he exchange rateexchange rate

Fully Flexible exchange rates may render the independence of Fully Flexible exchange rates may render the independence of monetary policy more effective, as interest rates will no longermonetary policy more effective, as interest rates will no longer have have to shadow the interest rate of the anchor currency to which the to shadow the interest rate of the anchor currency to which the DinarDinarwas pegged, but may be used towards addressing domestic was pegged, but may be used towards addressing domestic macroeconomic imbalances macroeconomic imbalances



e. Tunisiae. Tunisia

The transmission effects of the exchange and interest rates to GThe transmission effects of the exchange and interest rates to GDP DP are visible and significant reflecting again the important role are visible and significant reflecting again the important role that that exports play in the growth experience of Tunisia exports play in the growth experience of Tunisia

While the importance of the interest rate channel is not surprisWhile the importance of the interest rate channel is not surprising, ing, given that Tunisia has targeted the interest rate to stimulate egiven that Tunisia has targeted the interest rate to stimulate exports xports and GDP, this nevertheless raises an important issue in the contand GDP, this nevertheless raises an important issue in the context ext of inflation targeting of inflation targeting

Can Tunisia shift to targeting inflation knowing the Can Tunisia shift to targeting inflation knowing the consequences this move may have on the rate of growth of real consequences this move may have on the rate of growth of real GDP?GDP?

This is doubtful under the current economic circumstances. GreatThis is doubtful under the current economic circumstances. Greater er flexibility in the exchange rate should be allowed first to stimflexibility in the exchange rate should be allowed first to stimulate ulate exports and ease up the pressure on interest rates exports and ease up the pressure on interest rates

Once this is achieved, Tunisia will be able to shift to an inflaOnce this is achieved, Tunisia will be able to shift to an inflation tion targeting mechanism with minimal costs in terms of GDP and targeting mechanism with minimal costs in terms of GDP and employment. The transition from targeting output to prices needsemployment. The transition from targeting output to prices needs to to be accompanied with structural adjustment measures on the fiscalbe accompanied with structural adjustment measures on the fiscalside side



e. Turkeye. Turkey

Due to the recent currency crisis, the exchange rate is not effeDue to the recent currency crisis, the exchange rate is not effective ctive with respect to GDP, inflation and interest rates with respect to GDP, inflation and interest rates

However, the interest rate is quite effective with respect to GDHowever, the interest rate is quite effective with respect to GDP and P and inflationinflation

If the interest rate channel plays an important role, a substantIf the interest rate channel plays an important role, a substantial part ial part of the adjustment burden will fall on the exchange rate triggeriof the adjustment burden will fall on the exchange rate triggering ng another currency crisis. This would be particularly damaging, ifanother currency crisis. This would be particularly damaging, ifmonetary policy is targeting inflation monetary policy is targeting inflation

Turkey will need to keep fiscal policy well under control, otherTurkey will need to keep fiscal policy well under control, otherwise wise renewed fiscal pressures may once again undermine the recent renewed fiscal pressures may once again undermine the recent efforts of the central bank in building up credibility and in shefforts of the central bank in building up credibility and in shaping aping inflationaryinflationary expectationsexpectations


6. Conclusion and Policy Implications6. Conclusion and Policy ImplicationsThe first requirement for the MENA countries considering the The first requirement for the MENA countries considering the adoption of inflation targeting is that the central bank should adoption of inflation targeting is that the central bank should have a have a considerable degree of independenceconsiderable degree of independence

While recent efforts in Turkey and Egypt have rendered their While recent efforts in Turkey and Egypt have rendered their respective central banks more independent, the MENA governments respective central banks more independent, the MENA governments of Lebanon, Jordan, Morocco and Tunisia will have to devote furtof Lebanon, Jordan, Morocco and Tunisia will have to devote further her efforts towards further independence of their central banks, if efforts towards further independence of their central banks, if they they wish to successfully shift their monetary policy to targeting inwish to successfully shift their monetary policy to targeting inflation flation

The second requirement for adopting inflation targeting is that The second requirement for adopting inflation targeting is that the the authorities should refrain from targeting the level or path of aauthorities should refrain from targeting the level or path of any other ny other nominal variable, such as the nominal exchange rate: Jordan & nominal variable, such as the nominal exchange rate: Jordan & Lebanon Lebanon

A country that chooses a fixed exchange rate system subordinatesA country that chooses a fixed exchange rate system subordinatesits monetary policy to the exchange rate objective, and is not its monetary policy to the exchange rate objective, and is not effectively able to target directly any other nominal variable, effectively able to target directly any other nominal variable, such as such as the rate of inflation the rate of inflation

The empirical results of the paper have shown that with further The empirical results of the paper have shown that with further capital account liberalization in Morocco, the monetary authoritcapital account liberalization in Morocco, the monetary authority y may be compelled to introduce further flexibility in the exchangmay be compelled to introduce further flexibility in the exchange ratee rate

In Tunisia, greater flexibility in the exchange rate should be aIn Tunisia, greater flexibility in the exchange rate should be allowed llowed first to stimulate exports and ease up the pressure on interest first to stimulate exports and ease up the pressure on interest rates. rates. Once this is achieved, Tunisia will be able to shift to an inflaOnce this is achieved, Tunisia will be able to shift to an inflation tion targeting mechanism with minimal costs in terms of GDP and targeting mechanism with minimal costs in terms of GDP and employment. The transition from targeting output to prices needsemployment. The transition from targeting output to prices needs to to be accompanied with structural adjustment measures on the fiscalbe accompanied with structural adjustment measures on the fiscalsideside

While the future success of the inflation targeting policy regiWhile the future success of the inflation targeting policy regime shift me shift inin Egypt will depend on the ability of the central bank to isolate Egypt will depend on the ability of the central bank to isolate the the real side of the economy from nominal domestic and foreign shockreal side of the economy from nominal domestic and foreign shocks, s, its success in Turkey will depend on the ability to isolate the its success in Turkey will depend on the ability to isolate the monetary side of the economy from weaknesses emanating from a monetary side of the economy from weaknesses emanating from a weak public sectorweak public sector

Conclusion and Policy Implications ContConclusion and Policy Implications Cont’’dd

Other empirical results have highlighted the fact that for the MOther empirical results have highlighted the fact that for the MENA ENA economies of Egypt and Turkey, the exchange rate played a economies of Egypt and Turkey, the exchange rate played a dominant role in the transmission mechanism of monetary policy, dominant role in the transmission mechanism of monetary policy, while for Jordan, Lebanon, Morocco, and Tunisia, the interest rawhile for Jordan, Lebanon, Morocco, and Tunisia, the interest rate te played a dominant role in the transmission mechanism of monetaryplayed a dominant role in the transmission mechanism of monetarypolicy. policy.

These results have also pointed to the important role of the These results have also pointed to the important role of the exchange and interest rates as policy instruments in the exchange and interest rates as policy instruments in the transmission mechanism of transmission mechanism of MENAMENA’’ss monetary policiesmonetary policies

In the context of the transition to inflation targeting mechanisIn the context of the transition to inflation targeting mechanisms of ms of monetary policy for some MENA countries, this points to some rismonetary policy for some MENA countries, this points to some risks ks that the exchange rate or GDP could be over burdened by a that the exchange rate or GDP could be over burdened by a potential transition to targeting inflationpotential transition to targeting inflation

To avoid potential exchange rate overvaluations and renewed To avoid potential exchange rate overvaluations and renewed recessionary pressures, some flexibility in the inflation targetrecessionary pressures, some flexibility in the inflation target may be may be required at least in the short run required at least in the short run

Conclusion and Policy Implications ContConclusion and Policy Implications Cont’’dd

7.Appendix7.Appendix

a. Egypt

Appendix ContAppendix Cont’’dd

b. Jordan


c. Lebanon


d. Morocco


e. Tunisia


f. Turkey

monetary policy transmission and targeting … policy transmission and targeting mechanisms in the...

Documents