Inflation targeting via monetary policy corridors: a study of international experiences (Egypt, New Zealand, Turkey and Brazil) during the period (1990- 2020

Document Type : Original Article

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1 Department of Economics and Public Finance, Faculty of Commerce Tanta University, Tanta, Egypt

2 Department of Economics and Public Finance, Faculty of Commerce Tanta University,Tanta, Egypt

Abstract

Inflation targeting is a framework for achieving the ultimate goal of monetary policy. Many countries have shown that the inflation targeting mechanism is an effective system for managing monetary policy in its endeavor to achieve general price stability. This study aims at introducing the inflation targeting policy, defining monetary policy corridors and presenting the necessary requirements for the successful implementation of this policy. The researchers used the Autoregressive Distributed Lag (ARDL)model based on the data of the World Bank during the period from 1990-2020. The research concluded that in Egypt, the exchange rate and money supply are the two most influential paths in targeting inflation. As for New Zealand, the interest rate and money supply are the two most influential tools in targeting inflation. In Turkey, the interest rate, exchange rate and money supply are the most influential paths in targeting inflation. As for Brazil, the exchange rate and the interest rate are the two most effective tools for targeting inflation. This study recommends those in charge of monetary policy in thoses countries to focus on the most important variables in influencing inflation, which represent channels through which inflation can be targeted.

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