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Assessing Inflation Targeting Through Intervention Analysis

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  • Alvaro Angeriz

    (CCEPP and Wolfson College, University of Cambridge)

  • Philip Arestis

    (CCEPP and Wolfson College, University of Cambridge)

Abstract

The aim of this paper is to deal with the empirical aspects of the ‘new’ monetary policy framework, known as Inflation Targeting. Applying Intervention Analysis to multivariate Structural Time Series models, new empirical evidence is produced in the case of a number of OECD countries,. These results demonstrate that although Inflation Targeting has gone hand-in hand with low inflation, the strategy was introduced well after inflation had begun its downward trend. But, then, Inflation Targeting ‘locks in’ low inflation rates. The evidence produced in this paper suggests that non-IT central banks have also been successful on this score.

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File URL: http://repec.org/mmf2006/up.31417.1145548206.pdf
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Bibliographic Info

Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 87.

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Date of creation: 02 Feb 2007
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Handle: RePEc:mmf:mmfc06:87

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Web page: http://www.essex.ac.uk/afm/mmf/index.html

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Keywords: Inflation targeting; Intervention Analysis; Multivariate Structural Time Series;

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  1. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2006. "Does Inflation Targeting Make a Difference?," Working Papers 2006/13, Czech National Bank, Research Department.
  2. David Johnson, 2003. "The Effect of Inflation Targets on the Level of Expected Inflation in Five Countries," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1076-1081, November.
  3. Harvey, A.C. & Trimbur, T.M., 2001. "General Model-based Filters for Extracting Cycles and Trends in Economic Time Series," Cambridge Working Papers in Economics 0113, Faculty of Economics, University of Cambridge.
  4. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One decade of inflation targeting in the world : What do we know and what do we need to know?," Working Papers Central Bank of Chile 101, Central Bank of Chile.
  5. Gabriel Sterne, 2001. "Inflation Targets in a Global Context," Working Papers Central Bank of Chile 114, Central Bank of Chile.
  6. Laurence Ball & Niamh Sheridan, 2004. "Does inflation targeting matter?," DNB Staff Reports (discontinued) 118, Netherlands Central Bank.
  7. Andrew Harvey & Jared Bernstein, 2003. "Measurement and Testing of Inequality from Time Series of Deciles with an Application to U.S. Wages," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 141-152, February.
  8. Mishkin, Frederic S., 1998. "International Experiences With Different Monetary Policy Regimes," Seminar Papers 648, Stockholm University, Institute for International Economic Studies.
  9. Harvey, Andrew & Snyder, Ralph D., 1990. "Structural time series models in inventory control," International Journal of Forecasting, Elsevier, vol. 6(2), pages 187-198, July.
  10. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
  11. Andrew T. Levin & Fabio M. Natalucci & Jeremy M. Piger, 2004. "The macroeconomic effects of inflation targeting," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 51-80.
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