Is Zambia ready for inflation targeting?

2017-12-19 10:35:23 Viewed: 56 Downloads: 12
  • Is Zambia ready for inflation targeting?

      Munacinga C.H. Simatel, Eric Schaling and Paul Alagidede

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    Pub: 2017-12-19 10:35:23

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  • Since inflation targeting (IT) began about a quarter of a century ago, a number of
    industrialised and an increasing number of emerging and developing countries
    have adopted it as a framework for conducting monetary policy. Empirical
    evidence from developed economies suggests that the framework has been
    associated with low and stable inflation, and a reduction in inflation volatility. The
    evidence for African countries and other developing regions is not conclusive.

    Zambia is contemplating a policy of targeting inflation. This article assesses the
    readiness of Zambia for IT. We find that a number of preconditions for successful
    adoption are not fulfilled. Thus, while the idea itself has much merit, IT in an
    unprepared environment may produce perverse incentives, and complicate both
    fiscal and monetary policy. It is thus imperative that policy makers in Zambia and
    elsewhere in the developing world address the preconditions highlighted in this
    article, before adopting a fully-fledged IT policy.


    JEL codes: E3, E4, E5

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  • Keywords

    economic stability, financial development, inflation targeting, monetary policy, Zambia


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