The Choice of Inflation Targeting
AbstractThis paper assesses empirically the contribution of key macroeconomic and institutional variables in shaping the likelihood of choosing the Inflation Targeting (IT) regime in a sample that comprises countries working under such a regime and covers the period 1975-2005. I find inflation rate, financial development, GDP per capita and trade openness relevant for driving the choice of IT by estimating a discrete choice panel data model. Also, my results suggest that the initial conditions at the moment of IT adoption do matter because countries have different exposure to the likelihood of choosing IT as a result of their specific macroeconomic and institutional fundamentals and unobservable idiosyncratic factors.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 475.
Date of creation: Jul 2008
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