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Does inflation targeting matter for price stability?

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  • Guo, Minjie
  • Lim, Eun-Son

Abstract

Since New Zealand embraced Inflation Targeting (IT) as a monetary policy in 1990, numerous countries have followed suit. The inherent high accountability and transparency associated with central banks operating under an IT policy are anticipated to facilitate the attainment of price stability. This study aims to investigate the potential positive impact of IT policy on price stability by examining whether its implementation results in shorter durations of High Inflation Episodes (HIEs). HIEs are defined as periods during which a country experiences sustained and consecutive high inflation rates for a specific duration. We employ Survival Analysis with data spanning from 1980: Q1 to 2022: Q4 to explore this aspect.

Suggested Citation

  • Guo, Minjie & Lim, Eun-Son, 2024. "Does inflation targeting matter for price stability?," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 1015-1032.
    • Handle: RePEc:eee:reveco:v:91:y:2024:i:c:p:1015-1032
    DOI: 10.1016/j.iref.2024.01.035
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    More about this item

    Keywords

    Inflation targeting; Survival analysis; High inflation episodes;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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