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Inflation Targeting Monetary Policy and Macroeconomic Performance: The Case of Middle Income Countries

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  • Paul Owusu Takyi
  • Richard Fosu

Abstract

The number of studies investigating the effects of inflation targeting (IT) on inflation and macroeconomic variables has increased with the rising number of countries adopting IT. The empirical evidence has, however, failed to converge. In line with the need for more such studies, this paper uses a difference-in-differences (DID) model with dynamic panel fixed effect and instrumental variable (IV) techniques to estimate the effect of IT on inflation and economic growth for a sample of 40 middle-income countries. Generally, we find that the effects of IT on inflation is quantitatively large but statistically insignificant. We, however, find strong evidence that IT leads to higher growth in middle-income countries.

Suggested Citation

  • Paul Owusu Takyi & Richard Fosu, 2019. "Inflation Targeting Monetary Policy and Macroeconomic Performance: The Case of Middle Income Countries," Applied Economics and Finance, Redfame publishing, vol. 6(5), pages 1-9, September.
    • Handle: RePEc:rfa:aefjnl:v:6:y:2019:i:5:p:1-9
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    References listed on IDEAS

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    More about this item

    Keywords

    inflation targeting; inflation; economic growth; difference-in-difference;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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