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Inflation Targeters In Practice: A Lucky Lot?

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  • Francisco De A. Nadal-De Simone

Abstract

Some observers have attributed the success of inflation targeters in reducing inflation to the global disinflation of the 1990s. As a result, inflation targeting countries have been considered to be a lucky lot. One key policyimplication of that is that if the international environment becomes again hostile to low inflation in the future, inflation targeting will prove to have been a mere fad. This article views inflation targeting not just as a rule but as a framework for the conduct of monetary policy, and it argues that currently available analyses of the experience of inflation targeting countries have serious weaknesses. One weakness is that those studies have not taken into account that regime changes may alter the quantitative and qualitative interaction among small, open economies and the rest of the world. Another weakness is that those studies have not recognized that the extraction of common trends and cycles is contingent on the nature of the monetary policy regime. It is likely that inflation targeting frameworks may imply a new beneficial trend in monetary policy making. This suggests that if the international environment becomes again hostile to low inflation in the future, an inflation targeting framework may become a viable alternative to a central bank that remains committed to price stability. Copyright 2001 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 19 (2001)
Issue (Month): 3 (07)
Pages: 239-253

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Handle: RePEc:bla:coecpo:v:19:y:2001:i:3:p:239-253

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Cited by:
  1. Michael J. Dueker & Andreas M. Fischer, 2006. "Do inflation targeters outperform non-targeters?," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Sep, pages 431-450.
  2. Salomón Kalmanovitz, 2001. "El Banco De La República Y El Régimen De Meta De Inflación," BORRADORES DE ECONOMIA 002460, BANCO DE LA REPÚBLICA.
  3. John Huston & Roger Spencer, 2005. "International Monetary Policy: A Global Taylor Rule," International Advances in Economic Research, Springer, Springer, vol. 11(2), pages 125-134, May.

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