Inflation targeting and financial dollarization: an empirical investigation

Gökten, Selin
This study investigates the implications of financial dollarization for inflation targeting framework. To this end, monetary policy rule, inflation targeting performance and international reserves equations are estimated for twenty four inflation targeting countries with different levels of financial dollarization. The results based on the panel data estimations indicate that monetary policy rule and behavior of accumulating international reserves are affected by the degree of financial dollarization. Furthermore, the study finds that inflation targeting performance is not affected by the level of financial dollarization. Consequently, the empirical analysis suggests that even if financial dollarization does not affect the inflation targeting performance, it does affect the monetary policy rule and the variables to be taken into account to reach the target.


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Citation Formats
S. Gökten, “Inflation targeting and financial dollarization: an empirical investigation,” M.S. - Master of Science, Middle East Technical University, 2008.