The inflation Targeting effect on the inflation series: ANew Analysis Approach of evolutionary spectral analysis
AbstractIn this work, we study the inflation targeting effect on the inflation dynamics in the case of four industrial countries. Our objective is to check whether the inflation targeting policy (ITP) has a significant impact on the change of the inflation path. We use a non-parametric approach that doesn't require any previous modelling. This is the evolutionary spectral analysis, as defined by Priestley (1965-1996). Then, we use a test that can detect many break points on the timeseries. This test is inspired by Subba Rao (1981). We use an extension to this test to allow the detection of multiple breaks. We base this on the extension ofAhamada and Boutahar (2002). This is the first time that this method is used in the case of inflation-targeting countries. We find that the inflation-targeting policyhad a transition period for countries that had a high and volatile inflation experience before the inflation-targeting adoption. There is the case of New Zealand,Canada and Sweden. In these countries, we identify a structural change in the inflation series resulting to the inflation targeting intervention. However, In thecase of other countries like United Kingdom that have a relatively lower inflation rate experience before the ITP adoption, we didn't find a break point caused by this monetary policy intervention. In this case, the ITP had a role of ensuring this price stability. This result is explained by the fact that the inflation targetingis relevant when the initial inflation to be stabilized is near the target range (Artus, 2004). So, in this paper we justify the intuition of Artus (2004). The second result in our paper consists on the nature of inflation stabilization during the inflation-targeting period. The results proof a long-term stabilization on the inflation dynamic in the period of IT. These results traduce the success of this new framework to anchor the inflation expectation anchoring. So, we can conclude thatthis policy is preferment to ensure price stability in the case of industrials countries.
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inflation targeting; spectral analysis and structural change;
Other versions of this item:
- Essahbi Essaadi & Zied Ftiti, 2008. "The inflation Targeting effect on the inflation series: A New Analysis Approach of evolutionary spectral analysis," Working Papers 0832, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-31 (All new papers)
- NEP-MAC-2009-01-31 (Macroeconomics)
- NEP-MON-2009-01-31 (Monetary Economics)
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