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Do inflation targeters outperform non-targeters?

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Author Info
Michael J. Dueker
Andreas M. Fischer

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Abstract

Ten years of empirical studies of inflation targeting have not uncovered clear evidence that monetary policy that incorporates formal targets imparts better inflation performance. The authors survey the literature and find that the "no difference" verdict concerning inflation targeting has been robust to a wide range of countries and methods of analysis, starting with a study by Dueker and Fischer (1996a). The authors present updated Markov-switching estimates from the original Dueker and Fischer (1996a) article and show that their early conclusions about inflation targeting among early adopters have not been overturned with an additional decade of data. These findings to date do not rule out the possibility, however, that formal inflation targets could prove pivotal if the global environment of disinflation were to reverse course.

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Publisher Info
Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2006)
Issue (Month): Sep ()
Pages: 431-450
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:fip:fedlrv:y:2006:i:sep:p:431-450:n:v.88no.5

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Keywords: Inflation (Finance);

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Svensson, Lars E O, 1995. "The Swedish Experience of an Inflation Target," CEPR Discussion Papers 1103, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Laurence M. Ball & Niamh Sheridan, 2004. "Does Inflation Targeting Matter?," NBER Chapters, in: The Inflation-Targeting Debate, pages 249-282 National Bureau of Economic Research, Inc. [Downloadable!]
  3. Hamilton, James D., 1988. "Rational-expectations econometric analysis of changes in regime : An investigation of the term structure of interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 385-423. [Downloadable!] (restricted)
  4. Marco Vega & Diego Winkelried, 2005. "Inflation Targeting and Inflation Behavior: A Successful Story?," Macroeconomics 0502026, EconWPA. [Downloadable!]
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  5. L. Denby & J.M. Landwehr & C.L. Mallows, 2004. "Comment," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 633-634, January. [Downloadable!] (restricted)
  6. Manfred J.M. Neumann & Jrgen von Hagen, 2002. "Does inflation targeting matter?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 127-148. [Downloadable!]
  7. Bennett T. McCallum, 1998. "Inflation Targeting in Canada, New Zealand, Sweden, the United Kingdom, and in General," NBER Working Papers 5579, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Michael Dueker & Andreas M. Fischer, 2001. "The mechanics of a successful exchange rate peg: lessons for emerging markets," Review, Federal Reserve Bank of St. Louis, issue May, pages 47-56. [Downloadable!]
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  9. Michael J. Dueker & Andreas M. Fischer, 1998. "A guide to nominal feedback rules and their use for monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 55-63. [Downloadable!]
  10. repec:fip:fedreq:y:1987:i:sep:p:10-18:n:v.73no.5 is not listed on IDEAS
  11. Johnson, David R., 2002. "The effect of inflation targeting on the behavior of expected inflation: evidence from an 11 country panel," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1521-1538, November. [Downloadable!] (restricted)
  12. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  13. Pierre L. Siklos, 1999. "Inflation-target design: changing inflation performance and persistence in industrial countries," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 46-58. [Downloadable!]
  14. Nicoletta Batini & Douglas Laxton, 2006. "Under What Conditions Can Inflation Targeting Be Adopted? The Experience of Emerging Markets," Working Papers Central Bank of Chile 406, Central Bank of Chile. [Downloadable!]
  15. Andrew T. Levin & Fabio M. Natalucci & Jeremy M. Piger, 2004. "The macroeconomic effects of inflation targeting," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 51-80. [Downloadable!]
  16. Robert H. Rasche & Marcela M. Williams, 2005. "The effectiveness of monetary policy," Working Papers 2005-048, Federal Reserve Bank of St. Louis. [Downloadable!]
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  17. A.P. Dempster, 2004. "Comment," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 882-884, January. [Downloadable!] (restricted)
  18. Mathias Zurlinden, 1993. "The vulnerability of pegged exchange rates: the British pound in the ERM," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 41-56. [Downloadable!]
  19. Svensson, Lars E O & Woodford, Michael, 2004. "Implementing Optimal Policy Through Inflation-Forecast Targeting," CEPR Discussion Papers 4229, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  20. Bennett T. McCallum, 1994. "Specification and Analysis of a Monetary Policy Rule for Japan," NBER Working Papers 4449, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Francisco De A. Nadal-De Simone, 2001. "Inflation Targeters In Practice: A Lucky Lot?," Contemporary Economic Policy, Western Economic Association International, vol. 19(3), pages 239-253, 07. [Downloadable!] (restricted)
  22. Jim Lee, 1999. "Inflation Targeting In Practice: Further Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 17(3), pages 332-347, 07. [Downloadable!] (restricted)
  23. David Johnson, 2003. "The Effect of Inflation Targets on the Level of Expected Inflation in Five Countries," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1076-1081, 07. [Downloadable!] (restricted)
  24. Michael Woodford, 2004. "Inflation targeting and optimal monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 15-42. [Downloadable!]
  25. D.V. Lindley, 2004. "Comment," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 877-879, January. [Downloadable!] (restricted)
  26. Markus Hyvonen, 2004. "Inflation Convergence Across Countries," RBA Research Discussion Papers rdp2004-04, Reserve Bank of Australia. [Downloadable!]
  27. Jiri Jonas & Frederic S. Mishkin, 2003. "Inflation Targeting in Transition Countries: Experience and Prospects," NBER Working Papers 9667, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  28. Johannes Groeneveld & Kees Koedijk & Clemens Kool, 1998. "Inflation Dynamics and Monetary Strategies: Evidence from Six Industrialized Countries," Open Economies Review, Springer, vol. 9(1), pages 21-38, January. [Downloadable!] (restricted)
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  1. Beja, Jr., Edsel, 2007. "Win or Lose, It’s the Policy We Choose: Comparative economic performance of the inflation targeters," MPRA Paper 4833, University Library of Munich, Germany, revised 12 Sep 2007. [Downloadable!]
  2. WenShwo Fang & Stephen M. Miller & ChunShen Lee, 2009. "Inflation Targeting Evaluation: Short-run Costs and Long-run Irrelevance," Working papers 2009-14, University of Connecticut, Department of Economics. [Downloadable!]
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  3. Joshua Aizenman & Michael Hutchison & Ilan Noy, 2008. "Fiscal Storms: Inflation Targeting and Real Exchange Rates in Emerging Markets," Working Papers 200810, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
  4. Joshua Aizenman & Michael Hutchison & Ilan Noy, 2008. "Inflation Targeting and Real Exchange Rates in Emerging Markets," NBER Working Papers 14561, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Mihov, Ilian & Rose, Andrew K, 2007. "Is Old Money Better than New? Duration and Monetary Regimes," CEPR Discussion Papers 6529, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Giovanni Caggiano & Efrem Castelnuovo, 2008. "Long Memory and Non-Linearities in International Inflation," "Marco Fanno" Working Papers 0076, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
  7. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank communication and monetary policy - a survey of theory and evidence," Working Paper Series 898, European Central Bank. [Downloadable!]
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