Inflation targeting leads to more flexible exchange rates in emerging markets
The article explores how adopting inflation targeting affects the choice of exchange rate regimes in emerging markets. It finds that countries using inflation targeting tend to have more flexible exchange rate regimes. However, the flexibility of the exchange rate regime varies among these countries. Those with low trade and financial openness, as well as high external debt, have less flexible exchange rates. Additionally, the longer a country has been using inflation targeting, the more flexible its exchange rate regime becomes.