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A stylized fact of the transition process is an early profound exchange rate depreciation followed by continuing real appreciation. Absent historical reference points, it is difficult to judge whether the real appreciation is threatening competitiveness. This paper interprets the stylized facts and offers estimates of the equilibrium real exchange rate based on an international comparison of dollar wages and on a study of the dynamics of real exchange rates in several transition economies. The results suggest that the process of real appreciation is a combination of a return to equilibrium following the early overshooting and equilibrium appreciation.

Exports and Imports --- Foreign Exchange --- Inflation --- Labor --- Monetary Policy --- Price Level --- Deflation --- Open Economy Macroeconomics --- Comparative Studies of Particular Economies --- Wages, Compensation, and Labor Costs: General --- Current Account Adjustment --- Short-term Capital Movements --- Currency --- Foreign exchange --- Labour --- income economics --- Macroeconomics --- International economics --- Real exchange rates --- Exchange rates --- Wages --- Current account --- Prices --- Balance of payments --- Croatia, Republic of

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This paper extends the analysis of central bank independence to a model in which there is more than one policymaker. It shows that the degree of central bank independence as generally defined in the existing theoretical literature is only one of the influences on macroeconomic performance. The objectives of the fiscal authority, the commitment mechanisms available to the authorities and the nature of the policy game play a key role in determining the inflation rate and output in the economy. Furthermore, the model can be solved for the optimal degree of inflation aversion of the central bank. , a Working Paper and the authors) would welcome any comments on the present text Citations should refer to a Working Paper of the International Monetary Fund, mentioning the authors), and the date of issuance. The views expressed are those of the author(s) and do not necessarily represent those of the Fund.

Banks and Banking --- Inflation --- Public Finance --- Central Banks and Their Policies --- Price Level --- Deflation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- National Government Expenditures and Related Policies: General --- Banking --- Macroeconomics --- Public finance & taxation --- Central bank autonomy --- Expenditure --- Central bank organization --- Prices --- Central banks --- Central bank mandate --- Banks and banking --- Expenditures, Public --- New Zealand

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As with many monetary policy frameworks, inflation targeting is subject to the well-known problem of inflation bias. With inflation targeting, however, the bias becomes apparent not as inflation above desired levels, but as a wedge between the announced target and observed inflation. This inconsistency could render the framework neither credible nor enforceable since the target is overshot on average. The problem can be addressed by assigning price stability as the single policy objective or by assigning a joint target for both inflation and output, provided that they are consistent. Many inflation targeting countries take the joint target approach implicitly through transparency measures which publicly assess monetary conditions in terms of potential output and output gaps.

Banks and Banking --- Inflation --- Money and Monetary Policy --- Taxation --- Macroeconomics --- Production and Operations Management --- Monetary Policy --- Price Level --- Deflation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Taxation, Subsidies, and Revenue: General --- Central Banks and Their Policies --- Macroeconomics: Production --- Monetary economics --- Banking --- Public finance & taxation --- Inflation targeting --- Tax incentives --- Monetary policy frameworks --- Monetary policy --- Prices --- Price stabilization --- Potential output --- Production --- Banks and banking --- United Kingdom

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We examine whether Mexico’s disinflation experience during 1987-94 fits a widely accepted set of stylized facts of exchange rate-based stabilization (ERBS), and relate it to theories put forward to account for the boom-recession business cycle associated with ERBS. A cursory look at Mexican data shows that the experience fits quite closely the theoretical predictions and the stylized facts of ERBS. However, the paper shows that there were some important differences and peculiarities of the Mexican case that deserve further study, especially regarding the role of the nominal anchor and the nature of the business cycle.

Foreign Exchange --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Monetary Policy --- Studies of Particular Policy Episodes --- Price Level --- Deflation --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Currency --- Foreign exchange --- Economic growth --- Monetary economics --- Exchange rates --- Exchange rate arrangements --- Business cycles --- Nominal anchors --- Prices --- Monetary policy --- Mexico

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This paper reviews economic developments in Slovenia during 1990–96. Slovenia experienced its first positive real GDP growth in 1993. Real GDP grew by 1.3 percent. This modest recovery began under the impetus of buoyant domestic demand, which grew by 8¼ percent; real foreign demand contracted by 6½ percent owing to a recession in Western markets. Despite the growth in real aggregate demand by more than 2 percent, the output response was dampened as domestic demand growth spilled primarily into a boom in consumer goods imports.

Banks and Banking --- Foreign Exchange --- Labor --- Macroeconomics --- Inflation --- Wages, Compensation, and Labor Costs: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Aggregate Factor Income Distribution --- Price Level --- Deflation --- Currency --- Foreign exchange --- Labour --- income economics --- Banking --- Wages --- Exchange rates --- Income --- National accounts --- Prices --- Banks and banking --- Slovenia, Republic of