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Inflation Targeting: A three-decade perspective

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  • Abo-Zaid, Salem
  • Tuzemen, Didem

Abstract

Using cross-country data for developed and developing countries over the period 1980–2007, we study the effects of the Inflation Targeting regime on levels and volatilities of inflation, GDP growth and fiscal imbalances. Our results indicate that the targeting developing countries are associated with lower and more stable inflation, as well as higher and more stable GDP growth. The targeting developed nations experience higher GDP growth and conduct more disciplined fiscal policy after adopting the regime. The improvements in fiscal imbalances may be at least partly attributed to the attempts to achieve an inflation target. We conclude that non-targeting countries, would highly benefit from targeting inflation.

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Bibliographic Info

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

Volume (Year): 34 (2012)
Issue (Month): 5 ()
Pages: 621-645

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Handle: RePEc:eee:jpolmo:v:34:y:2012:i:5:p:621-645

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

Related research

Keywords: Inflation Targeting; Monetary policy; Fiscal policy;

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References

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  1. Marco Terrones & Luis Catão, 2001. "Fiscal Deficits and Inflation," IMF Working Papers 01/74, International Monetary Fund.
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  12. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2005. "When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 11-82 National Bureau of Economic Research, Inc.
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  15. 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.
  16. Civcir, Irfan & Akçaglayan, AnIl, 2010. "Inflation targeting and the exchange rate: Does it matter in Turkey?," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 339-354, May.
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Citations

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Cited by:
  1. 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.
  2. Minea, Alexandru & Tapsoba, René, 2014. "Does inflation targeting improve fiscal discipline?," Journal of International Money and Finance, Elsevier, vol. 40(C), pages 185-203.

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