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Does Inflation Targeting Make a Difference?

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  • Frederic S. Mishkin
  • Klaus Schmidt-Hebbel

Abstract

Yes, as inferred from panel evidence for inflation-targeting countries and a control group of high-achieving industrial countries that do not target inflation. Our evidence suggests that inflation targeting helps countries achieve lower inflation in the long run, have smaller inflation response to oil-price and exchange-rate shocks, strengthen monetary policy independence, improve monetary policy efficiency, and obtain inflation outcomes closer to target levels. Some benefits of inflation targeting are larger when inflation targeters have achieved disinflation and are able to make their inflation targets stationary. Despite these favorable results for inflation targeting, our evidence generally does not suggest that countries that adopt inflation targeting have attained better monetary policy performance relative to our control group of highly successful non-inflation targeters. However, inflation targeting does seem to help all country groups to move toward performance of the control group. The performance attained by industrial-country inflation targeters generally dominates performance of emerging-economy inflation targeters and is similar to that of industrial non-inflation targeting countries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12876.

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Date of creation: Jan 2007
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Handle: RePEc:nbr:nberwo:12876

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  2. Guillermo Calvo & Frederic S. Mishkin, 2003. "The Mirage of Exchange Rate Regimes for Emerging Market Countries," NBER Working Papers 9808, National Bureau of Economic Research, Inc.
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  27. 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?," NBER Working Papers 8397, National Bureau of Economic Research, Inc.
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  1. Po co bankom centralnym cel inflacyjny
    by k.mokrzycka in Obserwator Finansowy on 2012-02-27 05:29:46
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