Central Bank and Price Stability: Is a Single Objetive Enough?

Current developments in monetary theory, coupled with the recent practical experience of many and diverse central banks, suggest a number of basic tenets that could be regarded as effective guideposts in the search for successful practices that could contribute to attain and to sustain macroeconomic stabilization. While common sense, the myriad of accompanying circumstances within which policies and institutions develop, tend to confound their significance and to blur their basic meaning and implications. The purpose of this paper is to review and revisit, in the light of prevailing experience, the state of the art regarding monetary and central banking policies and analyze, by outlining these experiences in the form of seven basic principles, their significance for the achievement and the maintenance of macroeconomic stabilization. While each of these principles can be reviewed independently, they are, of course closely linked. The paper first scrutinizes the manner in which the literature has dealt with these issues and, in light of recent experiences, attempts to integrate them into an unified framework and to draw a number of policy lessons and theoretical implications.

Hungary : financial sector reform in a socialist economy

Financial reforms in formerly centrally planned economies take a different form than in market economies because they imply not only liberalizing the system but also reshaping the structure and functioning of financial markets. And the reforms must be designed to facilitate the conduct of monetary policy under rapidly changing economic circumstances. To fulfill this role, financial reforms should: (1) provide the authorities with monetary policy instruments that contribute to short-term stabilization; and (2) provide the incentives for inducing a more efficient intermediation of savings though the financial markets. In this context, the authors identify the main tasks and targets of financial reform and comment on the key development of the Hungarian process. Hungary has made substantial progress, they conclude, but macrofinancial indicators suggest that administrative and technical obstacles remain and that supporting measures must be deepened. The four steps needed are: (1) the ability of the monetary authority to conduct monetary policy must be enhanced; (2) the operating and financial condition of financial intermediaries must be improved; (3) healthy competition among financial intermediaries must be encouraged; and (4) a prudential regulatory framework that does not discriminate against the development of securities market must be established.Banks&Banking Reform,Financial Intermediation,Environmental Economics&Policies,Economic Theory&Research,Financial Crisis Management&Restructuring

Inflation Targeting in the Context of IMF-Supported Adjustment Programs

This paper argues that the IMF's traditional monetary conditionality--a ceiling on net domestic assets of the central bank and a floor on its net international reserves--should be adapted in IMF-supported adjustment programs with countries that have a framework of explicit inflation targets for the implementation of monetary policy. This adaptation should aim at enhancing correspondence and consistency between the monetary objectives of the central bank and the targets established under the IMF-supported adjustment program, as well as between the different instruments used to achieve the policy objectives and targets. The paper reviews various general options in this regard, and, using the case of Brazil as an example, demonstrates how these options may be implemented in practice. . Copyright 2002, International Monetary Fund

Inflation Targeting in the Context of IMF-Supported Adjustment Programs

This paper analyzes how an inflation targeting regimes relate with the conditioning established in the IMF assistance programs, and, in particular, with its inclusion within the performance criteria associated with that conditioning. The paper analyzes the Brazil's case, the first country in an IMF program to adopt an inflation target, and the lessons that can be derived from this experience. In its last section, we evaluate the idea of using Taylor rules to assess the inflationary performance. Simulations generated by the rule produces are not very similar to the effective policy rates, although differences diminish when expected inflation replaces current inflation within the rule.

Estrategias y políticas fiscales de transición en recientes experiencias de hiperestabilización

Este trabajo analiza los planes de estabilización adoptados desde mediados de esta década por cuatro países -Argentina, Bolívia, Brasil e Israel-, concetrándose especialmente en los efectos de dichos programas durante el primer año de implantados. Especial atención se dedica al manejo de la política fiscal dentro de este conjunto de políticas y al efecto de los planes de estabilización en las finanzas públicas