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The Inflation Targeting Debate

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  • Malte Rieth

Abstract

Inflation targeting has become one of the most prominent monetary regimes around the globe. Proponents argue that it reduces the dynamic inconsistency problem of monetary policy and thereby stabilises prices, which in turn promotes growth. Opponents, on the other hand, say that by focusing on price stability inflation targeting neglects other important policy objectives, such as financial stability, and thereby contributed to the built up of the global financial crisis. This roundup summarises the arguments made in the debate. It concludes that no consensus has emerged in the empirical literature about whether inflation targeting improves macroeconomic performance.

Suggested Citation

  • Malte Rieth, 2017. "The Inflation Targeting Debate," DIW Roundup: Politik im Fokus 107, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwrup:107en
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.550031.de/DIW_Roundup_107_en.pdf
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    References listed on IDEAS

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    1. 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.
    2. de Mendonça, Helder Ferreira & de Guimarães e Souza, Gustavo José, 2012. "Is inflation targeting a good remedy to control inflation?," Journal of Development Economics, Elsevier, vol. 98(2), pages 178-191.
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