Political economy of central-bank mandates in developing countries
Ybrayev Z.
Dec 2022Edward Elgar Publishing Ltd.
European Journal of Economics and Economic Policies: Intervention
2022#19Issue 3315 - 334 pp.
In this paper, I explain theoretically the coordination and conflict scheme of fiscal and monetary policy workings, and then empirically assess the effect of both inflation-targeting and non-inflation-only targeting policies on inflation and unemployment rates. I employ a difference-in-difference method to estimate the impact on inflation, the unemployment rate, and their volatilities in both 10 inflation-targeting (single-mandate) and 11 non-inflation-targeting (multiple-mandate) countries specifically from the sample of developing economies over the period from 1998 to 2018. Our key findings show that while the inflation-targeting countries effectively present a reduction in inflation and inflation vola-tility, the effects on the unemployment rate are negligible, while unemployment volatility is higher in the period 1998–2008. Finally, the paper argues that the unemployment rate should be used as a natural second target in a typical emerging-market economy case.
central banking , inflation targeting , political economy , unemployment
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NAC Analytica, Nazarbayev University, Kazakhstan
NAC Analytica
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