Advanced Search
MyIDEAS: Login

Does Inflation Targeting Reduce Inflation? An Analysis for the OECD Industrial Countries

Contents:

Author Info

  • Thomas Y. Wu

Abstract

Despite of its popularity, empirical studies have failed to find evidence of the causal effect of a country's adoption of the Inflation Targeting regime on that country's inflation rate decline. This paper applies the multi-period differences-in-differences estimation to the quarterly CPI inflation rates from the first quarter of 1985 until the third quarter of 2002 to the 22 OECD industrial countries and finds two basic sets of results. The first set of evidences is that countries that have officially adopted Inflation Targeting experience a decrease in their average inflation rates that is not only due to a reversion to mean process. The second set of results is that (1) there seems to be no evidence that Inflation Targeting countries experienced a significant increase in the level of their real interest rates after they adopted the new regime and that (2) even after controlling for the level of real interest rates there is still a causal effect from the adoption of Inflation Targeting to the reduction in inflation rates. In other words, the empirical evidence rejects the idea that the better performance in the inflation rates of the Inflation Targeting countries is only due to a more "aggressive" monetary policy.

Download Info

If 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.
File URL: http://www.bcb.gov.br/pec/wps/ingl/wps83.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 83.

as in new window
Length:
Date of creation: May 2004
Date of revision:
Handle: RePEc:bcb:wpaper:83

Contact details of provider:
Web page: http://www.bcb.gov.br/?english

Related research

Keywords:

References

References listed on IDEAS
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.:
as in new window
  1. N. Gregory Mankiw, 2001. "U. S. Monetary Policy During the 1990s," Harvard Institute of Economic Research Working Papers 1927, Harvard - Institute of Economic Research.
  2. Laurence M. Ball & Niamh Sheridan, 2004. "Does Inflation Targeting Matter?," NBER Chapters, in: The Inflation-Targeting Debate, pages 249-282 National Bureau of Economic Research, Inc.
  3. Alina Carare & Mark R. Stone, 2003. "Inflation Targeting Regimes," IMF Working Papers 03/9, International Monetary Fund.
  4. Corbo, Vittorio & Landerretche, Oscar & Schmidt-Hebbel, Klaus, 2001. "Assessing Inflation Targeting after a Decade of World Experience," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 343-68, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bcb:wpaper:83. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francisco Marcos Rodrigues Figueiredo).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.