THEORETICAL CONCEPTION OF PRICE STABILITY TARGETING ARRANGEMENT: INVESTIGATION OF BASIC PRINCIPLES OF IMPLEMENTATION MONETARY REGIME

A. Ya. Kuznyetsova, O. V. Klishchuk

Abstract


. The issue of choosing appropriate regime of targeting of internal and external national currency unit’s stability for small open economy becomes more and more challenging. Due to less lag effect of inflation targeting for such type of economy as Ukrainian small open economy system the targeting of price stability would be most optimal alternative in monetary regulation area. Furthermore, it’s been considered that pure persuading of strict inflation targeting rule causes higher volatility of foreign exchange rate, than under flexible regime like the agreement, which will be outlined in the work. Foreign exchange targeting evokes additional costs in conducting open market operations and monetary aggregates targeting is not robust in tackling inflation. Therefore, price stability targeting regime will support in committing of all these goals.  Next part of paper will be prearranged in such manner: in discussion section authors will provide comparisons of views on problem of switching between rule and discretion, necessity of central bank independence and what is conceptually underlined basis of price stability – the rule or arrangement.

In research, it will be discussed main approaches to giving definition of price stability targeting regime and will be determined principal basics of its realization. Also, authors will give a unifying approach to determining the essence of price stability targeting.


Keywords


small open economy; targeting of price stability; explicit rule; central bank’s independence; transparency.

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DOI: https://doi.org/10.18371/fcaptp.v2i23.121905

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ISSN (print) 2306-4994, ISSN (on-line) 2310-8770