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Does Institutional Change Really Matter? Inflation Targets, Central Bank Reform And Interest Rate Policy In The Oecd Countries

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  • Anton Muscatelli
  • Patrzio Tirelli
  • Carmine Trecroci

Abstract

We estimate forward-looking interest-rate reaction functions for the G3 economies and for a group of countries which recently adopted inflation targets. Some significant shifts in the conduct of monetary policy are detected in the G3 countries, especially in the USA and Japan. In contrast with popular wisdom, it is only since the 1990s that policies in these countries begin to look consistent with an inflation-targeting regime. In addition, the introduction of inflation targeting and central bank reforms in countries like Sweden, Canada and New Zealand has not led to major changes in the way in which central banks react to the objectives of economic policy. In all cases changes in policy behaviour pre-date the introduction of inflation targets and central bank reforms. The paper challenges the one-size-fits-all attitude towards modern central bank policymaking which permeates a great deal of the current literature.

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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 1999_20.

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Date of creation: Mar 1998
Date of revision: Jul 1999
Handle: RePEc:gla:glaewp:1999_20

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