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Inflation targeting and inflation persistence in Asia–Pacific

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  • Gerlach, Stefan
  • Tillmann, Peter
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    Abstract

    Following the Asian financial crisis in 1997–1998, a number of regional central banks adopted inflation targeting. While it is possible for the average inflation rate to be close to target, deviations of inflation could nevertheless be large and protracted. We therefore explore how successful this framework has been by looking at the persistence of inflation, as measured by the sum of the coefficients in an autoregressive model for inflation, using a median unbiased estimator and bootstrapped confidence bands. We find that persistence tends to decline following the adoption of inflation targeting. The speed by which persistence falls varies across countries. Interestingly, the economies not adopting inflation targeting show a smaller decline in persistence. Overall, we conclude that inflation targeting has performed well in Asia.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Asian Economics.

    Volume (Year): 23 (2012)
    Issue (Month): 4 ()
    Pages: 360-373

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    Handle: RePEc:eee:asieco:v:23:y:2012:i:4:p:360-373

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    Web page: http://www.elsevier.com/locate/asieco

    Related research

    Keywords: Inflation targeting; Asia; Inflation persistence; monetary policy strategy;

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    References

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    Cited by:
    1. Stephen M. Miller & WenShwo Fang & Ozkan Eren, 2012. "Inflation Targeting: Does It Improve Economic Performance?," Working Papers 1207, University of Nevada, Las Vegas , Department of Economics.
    2. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Rethinking Inflation Targeting: A Perspective from the Developing World," Centre for Growth and Business Cycle Research Discussion Paper Series 185, Economics, The Univeristy of Manchester.
    3. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Inflation Targeting and Financial Stability: A Perspective from the Developing World," Working Papers Series 324, Central Bank of Brazil, Research Department.
    4. Yanli LI, Hongfeng PENG & Hongfeng PENG, 2013. "Inflation Persistence in Nine Latin American Countries: Panel SURKSS Test with a Fourier Function," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 132-143, October.

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