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Right on Target: Exploring the Determinants of Inflation Targeting Adoption

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  • Hanna Samaryna
  • Jakob de Haan

Abstract

This paper examines which economic, fiscal, external, financial, and institutional characteristics of countries affect the likelihood that they adopt inflation targeting as their monetary policy strategy. We estimate a panel binary response transition model for 60 countries and two subsamples consisting of OECD and non-OECD countries over the period 1985-2008. The findings suggest that past macroeconomic performance of a country, its fiscal discipline, exchange rate arrangements, as well as the structure and development of its financial system have a significant impact on the likelihood to adopt inflation targeting. However, the determinants of inflation targeting differ between OECD and non-OECD countries.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 321.

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Date of creation: Nov 2011
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Handle: RePEc:dnb:dnbwpp:321

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Keywords: inflation targeting; monetary policy strategy;

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Citations

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Cited by:
  1. Jacobs, Jan & Samarina, Anna & Heijnen, Pim & Elhorst, Paul, 2013. "State transfers at different moments in time: A spatial probit approach," Research Report 13006-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  2. Jan-Egbert Sturm & Anna Samarina, 2013. "Factors Leading to Inflation Targeting – The Impact of Adoption," KOF Working papers 13-346, KOF Swiss Economic Institute, ETH Zurich.
  3. Lucotte, Yannick, 2012. "Adoption of inflation targeting and tax revenue performance in emerging market economies: An empirical investigation," Economic Systems, Elsevier, vol. 36(4), pages 609-628.

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