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Effects of adopting inflation targeting regimes on inflation variability

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  • Berument, Hakan
  • Yuksel, Ebru

Abstract

This paper investigates whether inflation-targeting programs have altered the pattern of inflation and its variability for five developed countries and four emerging economies implementing inflation-targeting programs. A GARCH specification is used to model inflation variability, which accounts for public perception of the future levels of inflation variability—conditional variance. We could not find lower conditional inflation expectations except for Australia, Chile and Sweden under various specifications. Moreover, the conditional variance decreases only for Chile and the UK. Therefore, the empirical support for the lower inflation and its variability for the inflation targeting regimes is limited.

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Bibliographic Info

Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 375 (2007)
Issue (Month): 1 ()
Pages: 265-273

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Handle: RePEc:eee:phsmap:v:375:y:2007:i:1:p:265-273

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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

Related research

Keywords: GARCH; Inflation targeting and inflation variability;

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References

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Citations

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Cited by:
  1. Jane M. Binner & Peter Tino & Jonathan Tepper & Richard G. Anderson & Barry Jones & Graham Kendall, 2009. "Does money matter in inflation forecasting?," Working Papers 2009-030, Federal Reserve Bank of St. Louis.
  2. Ivrendi, Mehmet & Guloglu, Bulent, 2010. "Monetary shocks, exchange rates and trade balances: Evidence from inflation targeting countries," Economic Modelling, Elsevier, vol. 27(5), pages 1144-1155, September.
  3. Naqvi, Bushra & Rizvi, Syed Kumail Abbas, 2009. "Inflation Targeting Framework: Is the story different for Asian Economies?," MPRA Paper 19546, University Library of Munich, Germany.
  4. Siok Kun Sek & Wai Mun Har, 2012. "Does Inflation Targeting Work in Emerging East-Asian Economies?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(5), pages 599-608, December.

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