Practical aspects of adopting an inflation-targeting regime in emerging economies: possible implications for Peru

This article examines the adoption of an inflation-targeting framework in emerging economies, with a particular focus on the implications for Peru. The study highlights that, despite growing interest from these countries, their institutional and economic contexts present unique challenges compared to developed economies. The analysis is based on a theoretical framework that identifies key elements for the success of an inflation-targeting regime, such as central bank independence, transparency, and a sound fiscal position. Using data from various emerging economies, the article evaluates Peru’s monetary policy framework in 2000 in relation to other countries that adopted this framework. The results indicate that Peru exhibits macroeconomic and financial characteristics that could hinder the successful implementation of inflation targeting, such as a weaker financial system and a higher degree of dollarization. Finally, the study suggests that to improve the effectiveness of the inflation-targeting framework, it is crucial to implement reforms that strengthen the central bank’s credibility and develop the domestic financial market, thereby fostering an environment conducive to price stability and economic growth. (Abstract and audio: Department of Economic Publications)