Advanced Search
MyIDEAS: Login to save this paper or follow this series

Some comparative evidence on the effectiveness of inflation targeting

Contents:

Author Info

  • Thomas Laubach
  • Adam Posen

Abstract

Does the adoption of an inflation target by a country have an effect on that country's rate of inflation and on inflation's interaction with real economic variables? Does inflation targeting alter private-sector expectations? The question of effectiveness must be posed as a counterfactual -did target adopting countries find economic benefits they would not have found had they not targeted? We offer three sets of measurements of the effect of inflation targeting: the first concerning whether the disinflation has been achieved at lower cost, or whether inflation has come down in targeters to a greater extent than we would attribute to normal cyclical factors; second, concerning whether the interactions between inflation, monetary policy, and real variables have changed; and the third concerning whether private-sector inflation expectations have come down after targeting beyond that usually associated with a drop in inflation. We consider the performance of New Zealand, Canada, the United Kingdom, and Sweden on these measures versus three baselines: their own past patterns prior to adoption; the performance of similar countries, Italy and Australia, which did not adopt targets; and the performance of two nominal targeters of long-standing, Germany and Switzerland, over the same period. We find that inflation targeting has had measurable effects on expectations and on the course of short-term interest rates, but that sacrifice ratios and Phillips curves remain unchanged in targeting countries.

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.newyorkfed.org/research/staff_reports/research_papers/9714.html
Download Restriction: no

File URL: http://www.newyorkfed.org/research/staff_reports/research_papers/9714.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Research Paper with number 9714.

as in new window
Length:
Date of creation: 1997
Date of revision:
Handle: RePEc:fip:fednrp:9714

Contact details of provider:
Postal: 33 Liberty Street, New York, NY 10045-0001
Email:
Web page: http://www.newyorkfed.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Inflation (Finance) ; Monetary policy;

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. Laurence Ball, 1993. "What determines the sacrifice ratio?," Working Papers 93-21, Federal Reserve Bank of Philadelphia.
  2. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
  3. Adam Posen, 1995. "Central bank independence and disinflationary credibility: a missing link?," Staff Reports 1, Federal Reserve Bank of New York.
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:
  1. Petra Gerlach-Kristen, 2006. "A Two-Pillar Phillips Curve for Switzerland," Working Papers 2006-09, Swiss National Bank.
  2. V. Anton Muscatelli & Patrizio Tirelli & Carmine Trecroci, 1998. "Institutional Change, Inflation Targeting and the Stability of Interest Rate Reaction Functions," Working Papers 20, University of Milano-Bicocca, Department of Economics, revised Oct 1998.
  3. Frederic S. Mishkin, 1999. "International Experiences with Different Monetary Policy Regimes," NBER Working Papers 6965, National Bureau of Economic Research, Inc.
  4. Pierre St-Amant & David Tessier, 2000. "Résultats empiriques multi-pays relatifs à l'impact des cibles d'inflation sur la crédibilité de la politique monétaire," Canadian Public Policy, University of Toronto Press, vol. 26(3), pages 295-310, September.
  5. Anton Muscatelli & Patrzio Tirelli & Carmine Trecroci, 1998. "Does Institutional Change Really Matter? Inflation Targets, Central Bank Reform And Interest Rate Policy In The Oecd Countries," Working Papers 1999_20, Business School - Economics, University of Glasgow, revised Jul 1999.
  6. Moretti, Laura, 2012. "Inflation targeting and product market deregulation," CFS Working Paper Series 2012/01, Center for Financial Studies (CFS).
  7. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
  8. 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).
  9. Eichengreen, Barry, 2001. "The EMS Crisis in Retrospect," CEPR Discussion Papers 2704, C.E.P.R. Discussion Papers.
  10. David R. Johnson & Sebastian Gerlich, 2002. "How Has Inflation Changed in Canada? A Comparison of 1989­2001 to 1964­1988," Canadian Public Policy, University of Toronto Press, vol. 28(4), pages 563-579, December.
  11. Ivrendi, Mehmet & Guloglu, Bulent, 2010. "Monetary shocks, exchange rates and trade balances: Evidence from inflation targeting countries," Economic Modelling, Elsevier, vol. 27(5), pages 1144-1155, September.

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:fip:fednrp:9714. 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: (Amy Farber).

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.