Chapter 9: Inflation and Monetary Policy in Selected Countries of the Asia-Pacific
One key theme of this book is that monetary policy has played a major role in macroeconomic stability in the Asia-Pacific region. Macroeconomic stability, in turn, has created an environment for rapid economic growth in an increasingly globalised economy. Sustained economic growth has been the main reason behind steady amelioration of poverty in developing Asia (Bhagwati, 2005; Dollar and Kraay, 2002; 2004; Tsai and Huang, 2007). Both monetary and fiscal policies have played a role in maintaining macroeconomic stability in developing Asia. Since the East Asian currency crises of the late 1990s monetary policy in particular has gained increased importance for price stability in this region. Monetary policy independence and its contribution to price stability, however, depend on exchange rate arrangements and capital flows. Since the 1990s most Asian developing countries have made exchange rates flexible and started removing capital controls. Although some of these countries have given autonomy to central banks, monetary and fiscal policies have not yet been adequately institutionalised. Provided that financial reforms and global economic integration continue in this region, most central banks in developing Asia should steadily gain credibility. This would make monetary policy more effective in achieving price stability (IMF’s World Economic Outlook, July 2008; Jongwanich and Park, 2008; Mohanty and Klau, 2001). This chapter provides an overview of inflation and monetary policy in selected countries of the Asia-Pacific. (Some brief comments are also made on monetary policy in the UK.) This is an abridged version of a longer background draft. The discussion covers...
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