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Does inflation targeting matter?

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  • Laurence Ball
  • Niamh Sheridan

Abstract

This paper asks whether inflation targeting improves economic performance, as measured by the behavior of inflation, output, and interest rates. We compare 7 OECD countries that adopted inflation targeting in the early 1990s to 13 that did not. After the early 1990s, performance improved along many dimensions for both targeting and nontargeting countries. In some cases, the targeters improved by more. However, these differences are explained by the fact that targeters performed worse than nontargeters before the early 1990s, and there is regression towards the mean. Once one controls for this, there is no evidence that inflation targeting improves performance.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 118.

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Date of creation: Jul 2004
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Handle: RePEc:dnb:staffs:118

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  1. Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
  2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, Octomber.
  3. Stephen G. Cecchetti & Michael Ehrmann, 2002. "Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 9, pages 247-274 Central Bank of Chile.
  4. Mishkin, Frederic S., 1998. "International Experiences With Different Monetary Policy Regimes," Seminar Papers 648, Stockholm University, Institute for International Economic Studies.
  5. Ball, Laurence, 1999. "Efficient Rules for Monetary Policy," International Finance, Wiley Blackwell, vol. 2(1), pages 63-83, April.
  6. Kuttner, Kenneth N. & Posen, Adam S., 1999. "Does talk matter after all? Inflation targeting and central bank behavior," CFS Working Paper Series 1999/04, Center for Financial Studies (CFS).
  7. repec:nbr:nberwo:12876 is not listed on IDEAS
  8. Chorng-Huey Wong & Eric V. Clifton & H. L. Leon, 2001. "Inflation Targeting and the Unemployment-Inflation Trade-Off," IMF Working Papers 01/166, International Monetary Fund.
  9. Vittorio Corbo & Óscar Landerretche & Klaus Schmidt-Hebbel, 2002. "Does Inflation Targeting Make a Difference?," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 5, pages 221-270 Central Bank of Chile.
  10. Laurence Ball, 1996. "Disinflation and the NAIRU," NBER Working Papers 5520, National Bureau of Economic Research, Inc.
  11. Svensson, Lars E O, 1995. "The Swedish Experience of an Inflation Target," CEPR Discussion Papers 1103, C.E.P.R. Discussion Papers.
  12. Frederic S. Mishkin & Adam S. Posen, 1998. "Inflation Targeting: Lessons from Four Countries," NBER Working Papers 6126, National Bureau of Economic Research, Inc.
  13. Frederic S. Mishkin, 2002. "Does inflation targeting matter? - commentary," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 149-154.
  14. Manfred J.M. Neumann & Jrgen von Hagen, 2002. "Does inflation targeting matter?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 127-148.
  15. Johnson, David R., 2002. "The effect of inflation targeting on the behavior of expected inflation: evidence from an 11 country panel," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1521-1538, November.
  16. Marc Zelmer & Andrea Schaechter, 2000. "Adopting Inflation Targeting," IMF Occasional Papers 202, International Monetary Fund.
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