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Inflation Targeting and Economic Stability in East Asian Countries

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  • G Babu Rao

Abstract

The present study empirically investigates the success of inflation targeting in reducing inflation uncertainty in East Asian countries, especially South Korea, the Philippines and Thailand. An attempt is made to examine whether inflation targeting has any impact on inflation variability in the countries adopting inflation targeting in East Asia. The study makes use of monthly data on Consumer Price Index. The study period spans from January 1970 to May 2010. This provides a rich dataset for the analysis, but some of the indices were introduced recently. The present study has undertaken a comprehensive set of econometric techniques, such as unit root tests, parametric tests (autocorrelation and variance ratio tests) and ARCH-GARCH tests. Towards this end, empirical results of parametric tests provided largely show inflation uncertainty. Finally, the study concludes that inflation targeting has good impact in reducing inflation variability and improving economic growth in South Korea, the Philippines and Thailand.

Suggested Citation

  • G Babu Rao, 2012. "Inflation Targeting and Economic Stability in East Asian Countries," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 39-58, February.
    • Handle: RePEc:icf:icfjmo:v:10:y:2012:i:1:p:39-58
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