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Inflation Targeting as a Framework for Monetary Policy: A Cross-Country Analysis

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  • William Seyfried
  • Dale Bremmer

Abstract

This study makes use of a dynamic Taylor-type model to examine the conduct of monetary policy by central banks that profess to engage in inflation targeting. Previous research regarding inflation targeting and Taylor-type rules is reviewed and a dynamic Taylor-type model is developed. Tests for regime shifts upon the adoption of inflation targeting indicate a significant change in policy in each of the nations in the study for which sufficient data were available. Next, the central bank reaction functions were estimated. Results suggest that most of the central banks conducted a policy of inflation targeting by seeking to contain inflationary pressures rather than reacting to current inflation. Copyright 2003 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.

Suggested Citation

  • William Seyfried & Dale Bremmer, 2003. "Inflation Targeting as a Framework for Monetary Policy: A Cross-Country Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(3), pages 291-299.
  • Handle: RePEc:bla:ausecr:v:36:y:2003:i:3:p:291-299
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    References listed on IDEAS

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    1. Kenneth N. Kuttner & Adam S. Posen, 1999. "Does Talk Matter After All? Inflation Targeting and Central Bank Behavior," Working Paper Series WP99-10, Peterson Institute for International Economics.
    2. Orphanides, Athanasios, 2003. "Monetary policy evaluation with noisy information," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 605-631, April.
    3. Andrew T.. Levin & Volker Wieland & John Williams, 1999. "Robustness of Simple Monetary Policy Rules under Model Uncertainty," NBER Chapters,in: Monetary Policy Rules, pages 263-318 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Warwick J. McKIBBIN, 2006. "Environmental Consequences of Rising Energy Use in China," Asian Economic Policy Review, Japan Center for Economic Research, vol. 1(1), pages 157-174.
    2. Raghbendra Jha, 2008. "Inflation targeting in India: issues and prospects," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 259-270.
    3. Creel, Jérôme & Hubert, Paul, 2015. "Has Inflation Targeting Changed The Conduct Of Monetary Policy?," Macroeconomic Dynamics, Cambridge University Press, vol. 19(01), pages 1-21, January.
    4. Hoda Selim, 2012. "Exploring the Role of the Exchange Rate in Monetary Policy in Egypt," Working Papers 733, Economic Research Forum, revised 2012.
    5. Paul Hubert, 2010. "Monetary Policy, Imperfect Information and the Expectations Channel," Sciences Po publications info:hdl:2441/f4rshpf3v1u, Sciences Po.
    6. repec:spo:wpecon:info:hdl:2441/f4rshpf3v1umfa09lat09b1bg is not listed on IDEAS
    7. Drakos, Anastassios A. & Kouretas, Georgios P., 2015. "The conduct of monetary policy in the Eurozone before and after the financial crisis," Economic Modelling, Elsevier, vol. 48(C), pages 83-92.
    8. Metin Ozdemir & Selim Tuzunturk, 2009. "Is price stability enough? Macroeconomic performance of inflation targeting in developing countries," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 1(4), pages 352-372.

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