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Inflation Targeting Mattered: a multivariate synthetic control approach

Author

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  • Ricardo D. Brito
  • Robison F. Kudamatsu
  • Vladimir K. Teles

Abstract

We use a multivariate synthetic control method that matches the price and output dynamics jointly to evaluate the effects of the inflation targeting regime (IT) on the inflation and output growth of its early adopters (the ITers) – New Zealand, Canada, the United Kingdom, Sweden, and Australia. Once accounting for the inflation-output tradeoff in the conduct of monetary policy, the ITers enjoyed lower inflation and/or higher output growth than their counterfactuals. These performances were economically important to justify IT central banks’ optimism with IT, both case-by-case and on average.

Suggested Citation

  • Ricardo D. Brito & Robison F. Kudamatsu & Vladimir K. Teles, 2021. "Inflation Targeting Mattered: a multivariate synthetic control approach," Working Papers, Department of Economics 2021_26, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2021wpecon26
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    References listed on IDEAS

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    1. Michael D. Bordo & Pierre Siklos, 2024. "The Importance of Sound Monetary Policy: Some Lessons for Today from Canada’s Experience with Floating Exchange Rates since 1950," Working Papers 320, Princeton University, Department of Economics, Center for Economic Policy Studies..

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    More about this item

    Keywords

    Inflation targeting; Multivariate synthetic control;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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