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Inflation targeting in low-income countries: Does IT work?

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  • Michael Bleaney
  • Atsuyoshi Morozumi
  • Zakari Mumuni

Abstract

Previous research on inflation targeting (IT) has focused on high-income countries (HICs) and emerging market economies (EMEs). Only recently has enough data accumulated for the performance of IT in low-income countries (LICs) to be assessed. We show that IT has not so far been effective in reducing in inflation in LICs, unlike in EMEs. Weak institutions, a typical feature in LICs, help explain this result, particularly under floating exchange rate regimes. Our interpretation is that poor institutions, leaving fiscal policy unconstrained, impair central banks' ability to conduct monetary policy in a way consistent with IT.

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  • Michael Bleaney & Atsuyoshi Morozumi & Zakari Mumuni, 2018. "Inflation targeting in low-income countries: Does IT work?," Discussion Papers 2018/08, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    • Handle: RePEc:not:notcfc:18/08
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    3. PINSHI, Christian P., 2022. "Inflation-Forecast Targeting: A New Framework for Monetary Policy?," MPRA Paper 111709, University Library of Munich, Germany.
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    6. Ashwin Madhou & Tayushma Sewak & Imad Moosa & Vikash Ramiah & Florian Gerth, 2021. "Towards Full-Fledged Inflation Targeting Monetary Policy Regime in Mauritius," JRFM, MDPI, vol. 14(3), pages 1-18, March.

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