Econometric Analysis of the Currency Crisis as a Consequence of Inflation Targeting
Jan 20, 2025
About this article
Published Online: Jan 20, 2025
Page range: 43 - 57
Received: Jul 16, 2024
Accepted: Aug 16, 2024
DOI: https://doi.org/10.2478/jcbtp-2025-0003
Keywords
© 2025 Borivoje D. Krušković, published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.
This paper analyzes the unanalized topic in macroeconomic (monetary) politics, which is the emergence of the currency crisis as a consequence of targeting inflation. Many central banks adopted inflation targeting under a pressure from the IMF. Sudden depreciation of exchange rate which results from a fall of foreign exchange reserves to a critically low level (below an optimal level) leads to currency crisis due speculative attack. The most widely used model in the decision of creating process of monetary policy in inflation targeting regime is the macroeconomic model of a small open economy from the group New Keynesian model.