Inflation Dynamics and Monetary Strategies: Evidence from Six Industrialized Countries
AbstractIn this paper we address the issue whether a switch to inflation targeting can help build monetary policy credibility and can substitute for a track record of low inflation. To this end, we empirically evaluate the success of inflation targeting in Canada, New Zealand and the United Kingdom and investigate to what extent the joint dynamic processes of inflation and nominal interest rates in these three countries have experienced a structural break at the time of the regime switch to inflation targeting. The experience of Canada, New Zealand and the United Kingdom is matched with the United States, Australia and Germany. We find that the effectiveness of the direct inflation targeting approach to quickly increase low-inflation credibility so far is ambiguous and that this strategy is not clearly superior to intermediate monetary strategies. Copyright Kluwer Academic Publishers 1998
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 9 (1998)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100323
credibility; monetary policy; inflation targeting; structural breaks;
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.:
- Canzoneri, Matthew B & Nolan, Charles & Yates, Tony, 1996.
"Mechanisms for Achieving Monetary Stability: Inflation Targeting Versus the ERM,"
CEPR Discussion Papers
1418, C.E.P.R. Discussion Papers.
- Canzoneri, Matthew B & Nolan, Charles & Yates, Anthony, 1997. "Mechanisms for Achieving Monetary Stability: Inflation Targeting versus the ERM," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 46-60, February.
- Pierre-Richard AgÃ©nor & Mark P. Taylor, 1991.
"Testing for Credibility Effects,"
IMF Working Papers
91/110, International Monetary Fund.
- Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
- Lars E.O. Svensson, 1995.
"The Swedish Experience of an Inflation Target,"
NBER Working Papers
4985, National Bureau of Economic Research, Inc.
- Canzoneri, Matthew B, 1985.
"Monetary Policy Games and the Role of Private Information,"
American Economic Review,
American Economic Association, vol. 75(5), pages 1056-70, December.
- Matthew B. Canzoneri, 1983. "Monetary policy games and the role of private information," International Finance Discussion Papers 249, Board of Governors of the Federal Reserve System (U.S.).
- Laurence Ball, 1992.
"Disinflation With Imperfect Credibility,"
NBER Working Papers
3983, National Bureau of Economic Research, Inc.
- Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
- Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
- Jeroen J. M. Kremers, 1990. "Gaining Policy Credibility for a Disinflation: Ireland's Experience in the EMS," IMF Staff Papers, Palgrave Macmillan, vol. 37(1), pages 116-145, March.
- V. Anton Muscatelli & Patrizio Tirelli & Carmine Trecroci, 1998.
"Institutional Change, Inflation Targeting and the Stability of Interest Rate Reaction Functions,"
9815, Business School - Economics, University of Glasgow, revised Aug 1998.
- V. Anton Muscatelli & Patrizio Tirelli & Carmine Trecroci, 1998. "Institutional Change, Inflation Targeting and the Stability of Interest Rate Reaction Functions," Working Papers 20, University of Milano-Bicocca, Department of Economics, revised Oct 1998.
- Meixing DAI, 2009.
"On the role of money growth targeting under inflation targeting regime,"
Working Papers of BETA
2009-11, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Dai, Meixing, 2009. "On the role of money growth targeting under inflation targeting regime," MPRA Paper 13780, University Library of Munich, Germany.
- Dai, Meixing, 2009.
"The Design of a 'Two-Pillar' Monetary Policy Strategy,"
Economics Discussion Papers
2009-29, Kiel Institute for the World Economy.
- Dai, Meixing, 2007. "The design of a ‘two-pillar’ monetary policy strategy," MPRA Paper 14403, University Library of Munich, Germany, revised Mar 2009.
- Baltensperger, Ernst & Fischer, Andreas M & Jordan, Thomas J., 2006.
"Strong Goal Independence and Inflation Targets,"
CEPR Discussion Papers
5915, C.E.P.R. Discussion Papers.
- Michael J. Dueker & Andreas M. Fischer, 2006. "Do inflation targeters outperform non-targeters?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 431-450.
- Anton Muscatelli & Patrizio Tirelli & Carmine Trecroci, 2000.
"Does Institutional Change Really Matter? Inflation Targets, Central Bank Reform and Interest Rate Policy in the OECD Countries,"
CESifo Working Paper Series
278, CESifo Group Munich.
- Muscatelli, V Anton & Tirelli, Patrizio & Trecroci, Carmine, 2002. "Does Institutional Change Really Matter? Inflation Targets, Central Bank Reform and Interest Rate Policy in the OECD Countries," Manchester School, University of Manchester, vol. 70(4), pages 487-527, Special I.
- Anton Muscatelli & Patrzio Tirelli & Carmine Trecroci, 1998. "Does Institutional Change Really Matter? Inflation Targets, Central Bank Reform And Interest Rate Policy In The Oecd Countries," Working Papers 1999_20, Business School - Economics, University of Glasgow, revised Jul 1999.
- V A Muscatelli & Patrizio Tirelli, 1995. "Institutional Change, Inflation Targets and the Stability of Interest Rate Reaction Functions in OECD Economies"," Working Papers 9606, Business School - Economics, University of Glasgow, revised Apr 1996.
- Holmes, Mark J. & Dutu, Richard & Cui, Xiaoman, 2009. "Real interest rates, inflation and the open economy: A regime-switching perspective on Australia and New Zealand," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 351-360, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.