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Does inflation targeting matter for output growth? Evidence from industrial and emerging economies

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  • Mollick, André Varella
  • Cabral, René
  • Carneiro, Francisco G.

Abstract

This paper examines the effects of inflation targeting (IT) on output growth over the "globalization years" of 1986-2004. Employing static panel data methods that control for traditional growth determinants, trade openness and financial globalization, the paper finds that the adoption of a fully fledged IT regime results in higher output income per capita for industrial and emerging economies. However, under dynamic model specifications, the estimated long-run output impact of inflation targeting for emerging market economies is found to be lower than in the case of static models. We argue that this might be due to the long lags until the full effects of greater credibility are felt in the real economy and the fact that emerging market economies adopted the regime much later than industrial economies.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 33 (2011)
Issue (Month): 4 (July)
Pages: 537-551

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Handle: RePEc:eee:jpolmo:v:33:y:2011:i:4:p:537-551

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Web page: http://www.elsevier.com/locate/inca/505735

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Keywords: Economic growth Globalization Inflation targeting Panel data methods;

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Cited by:
  1. Ftiti, Zied & Hichri, Walid, 2014. "The price stability under inflation targeting regime: An analysis with a new intermediate approach," Economic Modelling, Elsevier, vol. 38(C), pages 23-32.
  2. Rangan Gupta, 2011. "Growth-Effects of Inflation Targeting: The Role of Financial Sector Development," Annals of Economics and Finance, Society for AEF, vol. 12(1), pages 65-87, May.
  3. Ftiti, Zied, 2010. "The macroeconomic performance of the inflation targeting policy: An approach based on the evolutionary co-spectral analysis (extension for the case of a multivariate process)," Economic Modelling, Elsevier, vol. 27(1), pages 468-476, January.
  4. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Inflation Targeting and Financial Stability: A Perspective from the Developing World," Working Papers Series, Central Bank of Brazil, Research Department 324, Central Bank of Brazil, Research Department.
  5. Gustavo José De Guimarães E Souza & Helder Ferreira De Mendonça & Joaquim Pinto De Andrade, 2014. "Output Growth And Inflation Targeting: Empirical Effects Across The World," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Gra 057, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

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