Integrated inflation targeting
Another perspective from the developing world

Pierre-Richard Agénor and Luiz A. Pereira da Silva



This book provides a thorough assessment of recent experiences with inflation targeting (IT), the challenges it has faced since the global financial crisis, and ways in which these challenges have been, or should be, addressed. The discussion is conducted from the perspective of middle-income countries (MICs). As background for the analysis, Chapter 1 provides a review of key features of the financial system (with a focus on the role of bank credit) and the regulatory environment in MICs, the extent to which exposure to short-term capital flows affects economic stability in these countries, and the link between excessive credit growth and financial crises. Chapter 2 outlines the main characteristics of IT regimes, compared to other monetary policy regimes. Chapter 3 provides a detailed review of the evidence on the performance of these regimes in MICs. Both formal and informal evidence is considered. Chapter 4 discusses a number of challenges that IT has faced, including imperfect policy credibility, fiscal dominance, exchange rate volatility and the fear of floating, and the role of financial stability considerations in conducting monetary policy. The issue of whether monetary policy and macroprudential regulation are complements or substitutes, in a setting where both macroeconomic and financial stability matter, is taken up in Chapter 5. The analysis suggests that there are robust arguments to support the view that, in the context of an integrated inflation targeting (IIT) regime where central banks are concerned with achieving and maintaining both price and financial stability, monetary and macroprudential policies are complements. Issues associated with the design and practical implementation of IIT regimes are addressed in Chapter 6. The discussion emphasises the need to calibrate monetary and macroprudential policies jointly. Chapter 7 summarises the main policy lessons that can be drawn from the analysis.


About the authors

Pierre-Richard Agénor is Hallsworth Professor of International Macroeconomics and Development Economics at the University of Manchester and a Senior Fellow at FERDI and the OCP Policy Center. He has published numerous articles in leading professional journals and made contributions to a wide range of fields in economics, including international macroeconomics, development economics, growth theory, labour economics, and poverty analysis. He is the author of several books, including The economics of adjustment and growth (Harvard University Press), Public capital, growth and welfare (Princeton University Press), Development macroeconomics (with P Montiel, Princeton University Press), and more recently Monetary policy and macroprudential regulation with" "financial frictions (MIT Press).

Luiz Awazu Pereira da Silva is Deputy General Manager of the Bank for International Settlements. Prior to that, he was Deputy Governor at the Central Bank of Brazil, in charge of Economic Policy, International Affairs, and Financial Regulation. He also served as Deputy Finance Minister, in charge of International Affairs at the Ministry of Finance and Chief Economist of the Ministry of Budget and Planning. He is also a former Regional Country Director and Advisor to the Chief Economist at the World Bank and, in Japan, worked at the Institute of Fiscal and Monetary Policy of the Ministry of Finance and as Country Risk Director at the Export-Import Bank. He has published on development economics, modelling and poverty reduction and is the co-editor of The impact of macroeconomic policies on poverty and income distribution: macro-micro evaluation techniques and tools (Palgrave Macmillan World Bank).


Integrated inflation targeting
publication | format PDF | Size 3.5 MB
ISBN 978-92-9259-234-9 (print) ISBN 978-92-9259-235-6 (online)