Coping with the Recent Financial Crisis, did Inflation Targeting Make Any Difference?
AbstractThe effects of the 2008/2009 financial crisis went largely among the financial markets and hit the real economy, generating one of the greatest global economic shocks. The aim of this study is to investigate whether inflation targeting has made a difference during this crisis. We first present some arguments suggesting that inflation targeters can be expected to do better when facing a global shock. Applying difference in difference in the spirit of Ball and Sheridan (2005), we assess the difference between targeters and non-targeters and find that there is no significant difference concerning inflation rate and GDP growth. However, the rise in interest rates and inflation volatility during the crisis has been significantly less pronounced for targeters.
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Date of creation: 22 May 2012
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inflation targeting; financial crisis; macroeconomic performances; difference in difference.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-09 (All new papers)
- NEP-CBA-2013-06-09 (Central Banking)
- NEP-MAC-2013-06-09 (Macroeconomics)
- NEP-MON-2013-06-09 (Monetary Economics)
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