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What Impact Does Inflation Targeting Have On The Real Economy Of Developing And Emerging Countries?

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  • JOSE ANGELO DIVINO

    (Catholic University of Brasilia, SGAN 916, Modulo B, Office A-116, Zip 70.790-160, Brasilia — DF, Brazil)

Abstract

The inflation targeting (IT) regime has been adopted by several countries around the world. Despite the growing empirical literature, it is not clear whether developing and emerging countries can improve economic performance by adopting IT. We investigate how far macroeconomic policies anchored on IT impact on unemployment, economic growth, and output gap. The results show that IT causes no harm to the real economy of developing and emerging countries. On the contrary, it might reduce average unemployment and output gap. Thus, there is no apparent reason to condemn developing and emerging countries for adopting the IT regime.

Suggested Citation

  • Jose Angelo Divino, 2018. "What Impact Does Inflation Targeting Have On The Real Economy Of Developing And Emerging Countries?," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 1-18, September.
    • Handle: RePEc:wsi:afexxx:v:13:y:2018:i:03:n:s2010495218500124
    DOI: 10.1142/S2010495218500124
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    References listed on IDEAS

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    1. Frederic S. Miskin & Klaus Schmidt-Hebbel, 2007. "Does Inflation Targeting Make a Difference?," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 9, pages 291-372, Central Bank of Chile.
    2. Goncalves, Carlos Eduardo S. & Salles, Joao M., 2008. "Inflation targeting in emerging economies: What do the data say?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 312-318, February.
    3. Lin, Shu & Ye, Haichun, 2007. "Does inflation targeting really make a difference? Evaluating the treatment effect of inflation targeting in seven industrial countries," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2521-2533, November.
    4. Nicoletta Batini & Douglas Laxton, 2007. "Under What Conditions Can Inflation Targeting Be Adopted? The Experience of Emerging Markets," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 12, pages 467-506, Central Bank of Chile.
    5. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
    6. Brito, Ricardo D. & Bystedt, Brianne, 2010. "Inflation targeting in emerging economies: Panel evidence," Journal of Development Economics, Elsevier, vol. 91(2), pages 198-210, March.
    7. Divino, Jose Angelo, 2009. "Optimal monetary policy for a small open economy," Economic Modelling, Elsevier, vol. 26(2), pages 352-358, March.
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