IDEAS home Printed from https://ideas.repec.org/a/aka/aoecon/v66y2016i3p375-392.html
   My bibliography  Save this article

Does Inflation Targeting Work Well? Evidence from CEE Countries

Author

Listed:
  • Chen Wang

    (Research School of Finance (RSFAS), Australian National University, Canberra
    Division of Science and Technology, United International College, Zhuhai, China)

Abstract

This article examines the effects of inflation targeting (IT) policy on inflation and output performance. I employ the propensity score matching method for the sample of CEE countries from 1990 to 2010. The evidence suggests that the IT regime does not have a significant effect on the inflation level or the inflation volatility; however, the IT framework can help to increase GDP per capita. The effects on inflation indicators are inconsistent with previous studies. The results are robust to different methodologies.

Suggested Citation

  • Chen Wang, 2016. "Does Inflation Targeting Work Well? Evidence from CEE Countries," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 66(3), pages 375-392, September.
    • Handle: RePEc:aka:aoecon:v:66:y:2016:i:3:p:375-392
    Note: I am greatly indebted to Professor Renée Fry-McKibbin and Dr. Gaurab Ayal for their helpful suggestions and advice. I am also grateful to the two anonymous referees for their comments. All remaining errors are my own.
    as

    Download full text from publisher

    File URL: http://www.akademiai.com/doi/pdf/10.1556/032.2016.66.3.1
    Download Restriction: subscription
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Arminio Fraga & Ilan Goldfajn & André Minella, 2004. "Inflation Targeting in Emerging Market Economies," NBER Chapters, in: NBER Macroeconomics Annual 2003, Volume 18, pages 365-416, National Bureau of Economic Research, Inc.
    2. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
    3. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    4. Goncalves, Carlos Eduardo S. & Salles, Joao M., 2008. "Inflation targeting in emerging economies: What do the data say?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 312-318, February.
    5. Bernanke, Ben S. & Woodford, Michael (ed.), 2006. "The Inflation-Targeting Debate," National Bureau of Economic Research Books, University of Chicago Press, number 9780226044729, December.
    6. Lin, Shu & Ye, Haichun, 2007. "Does inflation targeting really make a difference? Evaluating the treatment effect of inflation targeting in seven industrial countries," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2521-2533, November.
    7. Nicoletta Batini & Douglas Laxton, 2007. "Under What Conditions Can Inflation Targeting Be Adopted? The Experience of Emerging Markets," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 12, pages 467-506, Central Bank of Chile.
    8. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    9. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
    10. Manfred J. M. Neumann & Jurgen Von Hagen, 2002. "Does inflation targeting matter?," Review, Federal Reserve Bank of St. Louis, vol. 84(Jul), pages 127-148.
    11. Hiroyuki Taguchi & Chizuru Kato, 2011. "Assessing the performance of inflation targeting in East Asian economies," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 25(1), pages 93-102, May.
    12. Mishkin, Frederic S. & Savastano, Miguel A., 2001. "Monetary policy strategies for Latin America," Journal of Development Economics, Elsevier, vol. 66(2), pages 415-444, December.
    13. Brito, Ricardo D. & Bystedt, Brianne, 2010. "Inflation targeting in emerging economies: Panel evidence," Journal of Development Economics, Elsevier, vol. 91(2), pages 198-210, March.
    14. Pathan, Shams & Faff, Robert, 2013. "Does board structure in banks really affect their performance?," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1573-1589.
    15. Piotr Ciżkowicz & Andrzej Rzońca, 2015. "Inflation Targeting and its Discontents: The Case of Poland," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 65(supplemen), pages 107-122, December.
    16. Rose, Andrew K., 2007. "A stable international monetary system emerges: Inflation targeting is Bretton Woods, reversed," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 663-681, September.
    17. Lin, Shu & Ye, Haichun, 2009. "Does inflation targeting make a difference in developing countries?," Journal of Development Economics, Elsevier, vol. 89(1), pages 118-123, May.
    18. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
    19. Carare, Alina & Stone, Mark R., 2006. "Inflation targeting regimes," European Economic Review, Elsevier, vol. 50(5), pages 1297-1315, July.
    20. de Mendonça, Helder Ferreira & de Guimarães e Souza, Gustavo José, 2012. "Is inflation targeting a good remedy to control inflation?," Journal of Development Economics, Elsevier, vol. 98(2), pages 178-191.
    21. Mr. Scott Roger, 2009. "Inflation Targeting at 20 - Achievements and Challenges," IMF Working Papers 2009/236, International Monetary Fund.
    22. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Petrevski, Goran, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," EconStor Preprints 271122, ZBW - Leibniz Information Centre for Economics.
    2. Petrevski, Goran, 2023. "Determinants of Inflation Targeting: A Survey of Empirical Literature," EconStor Preprints 271121, ZBW - Leibniz Information Centre for Economics.
    3. Goran Petrevski, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," Papers 2305.17474, arXiv.org.
    4. Arsić, Milojko & Mladenović, Zorica & Nojković, Aleksandra, 2022. "Macroeconomic performance of inflation targeting in European and Asian emerging economies," Journal of Policy Modeling, Elsevier, vol. 44(3), pages 675-700.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Soe, Than Than & Kakinaka, Makoto, 2018. "Inflation targeting and income velocity in developing economies: Some international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 44(C), pages 44-61.
    2. Goran Petrevski, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," Papers 2305.17474, arXiv.org.
    3. Anna Samarina & Mirre Terpstra & Jakob De Haan, 2014. "Inflation targeting and inflation performance: a comparative analysis," Applied Economics, Taylor & Francis Journals, vol. 46(1), pages 41-56, January.
    4. Petrevski, Goran, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," EconStor Preprints 271122, ZBW - Leibniz Information Centre for Economics.
    5. Renée A. Fry-McKibbin & Chen Wang, 2014. "Does Inflation Targeting Outperform Alternative Policies during Global Downturns?," CAMA Working Papers 2014-64, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    6. Minea, Alexandru & Tapsoba, René, 2014. "Does inflation targeting improve fiscal discipline?," Journal of International Money and Finance, Elsevier, vol. 40(C), pages 185-203.
    7. Petrevski, Goran, 2023. "Determinants of Inflation Targeting: A Survey of Empirical Literature," EconStor Preprints 271121, ZBW - Leibniz Information Centre for Economics.
    8. Anna Samarina & Jakob De Haan, 2014. "Right On Target: Exploring The Factors Leading To Inflation Targeting Adoption," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 372-389, April.
    9. Weneyam Hippolyte Balima & Jean-Louis Combes & Alexandru Minea, 2015. "Sovereign Debt Risk in Emerging Countries: Does Inflation Targeting Adoption Make Any Difference?," CERDI Working papers halshs-01128239, HAL.
    10. Hippolyte W. Balima & Eric G. Kilama & Rene Tapsoba, 2017. "Settling the Inflation Targeting Debate: Lights from a Meta-Regression Analysis," IMF Working Papers 2017/213, International Monetary Fund.
    11. Valera, Harold Glenn A. & Holmes, Mark J. & Hassan, Gazi M., 2017. "How credible is inflation targeting in Asia? A quantile unit root perspective," Economic Modelling, Elsevier, vol. 60(C), pages 194-210.
    12. López-Villavicencio, Antonia & Pourroy, Marc, 2019. "Does inflation targeting always matter for the ERPT? A robust approach," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 360-377.
    13. Balima, Wenéyam Hippolyte & Combes, Jean-Louis & Minea, Alexandru, 2017. "Sovereign debt risk in emerging market economies: Does inflation targeting adoption make any difference?," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 360-377.
    14. Jean‐Louis Combes & Xavier Debrun & Alexandru Minea & René Tapsoba, 2018. "Inflation Targeting, Fiscal Rules and the Policy Mix: Cross‐effects and Interactions," Economic Journal, Royal Economic Society, vol. 128(615), pages 2755-2784, November.
    15. René TAPSOBA & Alexandru MINEA & Jean-Louis COMBES, 2012. "Inflation Targeting and Fiscal Rules: Do Interactions and Sequence of Adoption Matter?," Working Papers 201223, CERDI.
    16. Kadria, Mohamed & Ben Aissa, Mohamed Safouane, 2016. "Inflation targeting and public deficit in emerging countries: A time varying treatment effect approach," Economic Modelling, Elsevier, vol. 52(PA), pages 108-114.
    17. Balima, Hippolyte W. & Kilama, Eric G. & Tapsoba, René, 2020. "Inflation targeting: Genuine effects or publication selection bias?," European Economic Review, Elsevier, vol. 128(C).
    18. Jean-Louis Combes & Mr. Xavier Debrun & Alexandru Minea & Rene Tapsoba, 2014. "Inflation Targeting and Fiscal Rules: Do Interactions and Sequencing Matter?," IMF Working Papers 2014/089, International Monetary Fund.
    19. Svensson, Lars E.O., 2010. "Inflation Targeting," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 22, pages 1237-1302, Elsevier.
    20. René TAPSOBA, 2010. "Does Inflation Targeting Improve Fiscal Discipline? An Empirical Investigation," Working Papers 201020, CERDI.

    More about this item

    Keywords

    inflation; inflation targeting; CEE countries; propensity score matching;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aka:aoecon:v:66:y:2016:i:3:p:375-392. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kriston, Orsolya (email available below). General contact details of provider: https://akademiai.hu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.