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Assessing the Performance of 'Inflation Targeting Lite' Countries

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  • Alvaro Angeriz
  • Philip Arestis

Abstract

This paper deals with what is referred to in the literature as the 'Inflation Targeting Lite' (ITL) countries. These are a category of emerging countries, whose main characteristics are that they are least developed and small economies that pursue IT. They use inflation targeting to define their monetary policy framework, but for a number of reasons they are not in a position to put top priority to IT in relation to other objectives. This paper deals with a set of ITL countries for which consistent data could be gathered, and for which a date for setting inflation targeting could be discerned. The object of the paper is to study the impact of IT on actual inflation and inflation expectations. We utilise intervention analysis to time series on inflation for a number of ITL countries, which have actually implemented IT. In doing so our main concern is to assess whether, due to the IT intervention, there has been a significant change in the trend corresponding to these series and the extent to which inflation rates have actually been 'locked-in' at low levels after the implementation of IT. Two major results emerge. The first is that ITL countries have been successful in 'locking-in' inflation rates. The second is that non-IT countries have also been successful in terms of the 'lock-in' effect. Our overall conclusion, then, is that other factors in addition to IT underpin the apparent success of the control of inflation. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd .

Suggested Citation

  • Alvaro Angeriz & Philip Arestis, 2007. "Assessing the Performance of 'Inflation Targeting Lite' Countries," The World Economy, Wiley Blackwell, vol. 30(11), pages 1621-1645, November.
  • Handle: RePEc:bla:worlde:v:30:y:2007:i:11:p:1621-1645
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    References listed on IDEAS

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    1. Thórarinn G. Pétursson, 2004. "The effects of inflation targeting on macroeconomic performance," Economics wp23_thorarinn, Department of Economics, Central bank of Iceland.
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    5. Edwin M. Truman, 2003. "Inflation Targeting in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 346.
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    7. International Monetary Fund, 2005. "Inflation Targeting Lite' in Small Open Economies; The Case of Mauritius," IMF Working Papers 05/172, International Monetary Fund.
    8. 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.
    9. Mark R. Stone, 2003. "Inflation Targeting Lite," IMF Working Papers 03/12, International Monetary Fund.
    10. Ashok Bhundia & Mark R. Stone, 2004. "A New Taxonomy of Monetary Regimes," IMF Working Papers 04/191, International Monetary Fund.
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    1. repec:bla:ecorec:v:93:y:2017:i:300:p:67-88 is not listed on IDEAS
    2. Esteban Pérez Caldentey & Matías Vernengo, 2013. "Is inflation targeting operative in an open economy setting?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(3), pages 347-369, January.
    3. Carlos Carrasco & Jesus Ferreiro, 2013. "Inflation targeting in Mexico," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(3), pages 341-372.
    4. Philip Arestis & Fernando Ferrari-Filho & Luiz Fernando de Paula, 2011. "Inflation targeting in Brazil," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(2), pages 127-148.
    5. Chortareas, Georgios & Jitmaneeroj, Boonlert & Wood, Andrew, 2012. "Forecast rationality and monetary policy frameworks: Evidence from UK interest rate forecasts," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 209-231.
    6. Arto Kovanen, 2011. "Does Money Matter for Inflation in Ghana?," IMF Working Papers 11/274, International Monetary Fund.
    7. Carlos A. Carrasco & Jesús Ferreiro, 2011. "Inflation Targeting and Economic Performance: The Case of Mexico," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(5), pages 675-692, December.
    8. Valera, Harold Glenn A. & Holmes, Mark J. & Hassan, Gazi M., 2017. "How credible is inflation targeting in Asia? A quantile unit root perspective," Economic Modelling, Elsevier, vol. 60(C), pages 194-210.
    9. Ardakani, Omid & Kishor, Kundan & Song, Suyong, 2015. "On the Effectiveness of Inflation Targeting: Evidence from a Semiparametric Approach," MPRA Paper 75091, University Library of Munich, Germany.
    10. Arestis, Philip & Chortareas, Georgios & Magkonis, Georgios & Moschos, Demetrios, 2014. "Inflation targeting and inflation convergence: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 285-295.
    11. Marconi, Nelson & Reis, Cristina Fróes de Borja & Araújo, Eliane Cristina de, 2016. "Manufacturing and economic development: The actuality of Kaldor's first and second laws," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 75-89.
    12. Sánchez, Marcelo, 2009. "Characterising the inflation targeting regime in South Korea," Working Paper Series 1004, European Central Bank.
    13. Philip Arestis & Malcolm Sawyer, 2013. "Moving from Inflation Targeting to Prices and Incomes Policy," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(1), pages 1-17, March.

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