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Inflation Targeting and Inflation Behavior: A Successful Story?

Author

Listed:
  • Marco Vega

    (London School of Economics and Central Bank of Peru)

  • Diego Winkelried

    (St. Edmund’s College, University of Cambridge)

Abstract

This paper estimates the effects of inflation targeting (IT) adoption over inflation dynamics using a wide control group. We contribute to the current IT evaluation literature by considering the adoption of IT by a country as a treatment, just as in the program evaluation literature. Hence, we perform propensity score matching to find suitable counterfactuals to the actual inflation targeters. We find out that IT has helped in reducing the level and volatility of inflation in the countries that adopted it. This result is robust to alternative definitions of treatment and control groups.

Suggested Citation

  • Marco Vega & Diego Winkelried, 2005. "Inflation Targeting and Inflation Behavior: A Successful Story?," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
    • Handle: RePEc:ijc:ijcjou:y:2005:q:4:a:5
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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