The Impact of Inflation Targeting Policy on Currency Management in Developing Countries

of the main issues in the developing countries is the correct management of the exchange rate, so that less or more evaluation than the equilibrium exchange rate causes instability and imbalances in macroeconomics, especially in the field of exports and imports, the general level of prices And financial markets. Hence, economic policymakers are seeking solutions that will enable them to steer the exchange rate in the right direction. The most important of these factors is inflation. this study, the effect of inflation targeting policy on exchange rate management in the selected developing countries during the period 2000-2017 by the method of panel data has been investigated. Experimental results showed that the deviation of inflation from its target rate caused real exchange rate deviations from its equilibrium level. Also, changes in the rate of inflation in the outside world, changes in the nominal exchange rate and current account balance changes lead to a deviation of the exchange rate from its equilibrium level, but the effects of changes in capital flow on the exchange rate deviation from its equilibrium level were not statistically significant. But interactive effects showed that the inflation targeting policy played a significant role in measuring the impact of changes in the nominal exchange rate, domestic inflation and external inflation on real exchange rate deviations from Its balance rate. But this policy leads to a significant reduction in the role of current account and capital account changes in increasing the real exchange rate deviations from its equilibrium level.