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The effects of inflation targeting on macroeconomic performance

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  • Thórarinn G. Pétursson
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    Abstract

    An increasing number of countries have adopted inflation targeting since New Zealand first adopted this framework in early 1990. Currently there are 21 countries using inflation targeting in every continent of the world. This paper discusses the economic effects of inflation targeting. The main conclusion is that inflation targeting has largely been a success. The new framework has made central banks, which previously lacked credibility, able to change the way they do monetary policy towards what is commonly considered best practice. In many respects they have even been leading in creating a new benchmark for how to formulate monetary policy.

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    Bibliographic Info

    Paper provided by Department of Economics, Central bank of Iceland in its series Economics with number wp23_thorarinn.

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    Date of creation: Jun 2004
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    Handle: RePEc:ice:wpaper:wp23_thorarinn

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    1. George A. Kahn & Klara Parrish, 1998. "Conducting monetary policy with inflation targets," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-32.
    2. Ammer, John & Freeman, Richard T., 1995. "Inflation targeting in the 1990s: The experiences of New Zealand, Canada, and the United Kingdom," Journal of Economics and Business, Elsevier, vol. 47(2), pages 165-192, May.
    3. Benjamin M. Friedman & Kenneth N. Kuttner, 1996. "A price target for U.S. monetary policy? Lessons from the experience with money growth targets," Working Paper Series, Macroeconomic Issues WP-96-14, Federal Reserve Bank of Chicago.
    4. Kenneth N. Kuttner & Adam S. Posen, 2000. "Inflation, Monetary Transparency, and G3 Exchange Rate Volatility," Working Paper Series WP00-6, Peterson Institute for International Economics.
    5. Vittorio Corbo & Oscar Landerretche & Klaus Schmidt-Hebbel, 2001. "Assessing Inflation Targeting after a Decade of World Experience," Working Papers 51, Oesterreichische Nationalbank (Austrian Central Bank).
    6. Frederic S. Mishkin, 1999. "International Experiences with Different Monetary Policy Regimes," NBER Working Papers 6965, National Bureau of Economic Research, Inc.
    7. 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.
    8. Edwin M. Truman, 2003. "Inflation Targeting in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 346.
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