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Inflation Targeting Matters: Evidence from OECD Economies' Sacrifice Ratios

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  • CARLOS EDUARDO S. GONÇALVES
  • ALEXANDRE CARVALHO

Abstract

Using data from OECD economies, we show that inflation targeters suffered smaller output losses during disinflations when compared to nontargeters. We also study why some countries choose to inflation target while others do not and find that higher average inflation and smaller debt levels render the adoption of the regime more likely. Applying Heckman's procedure to control for selection bias does not alter the link between inflation targeting and less costly disinflations. Copyright (c) 2009 The Ohio State University.

Suggested Citation

  • Carlos Eduardo S. Gonçalves & Alexandre Carvalho, 2009. "Inflation Targeting Matters: Evidence from OECD Economies' Sacrifice Ratios," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 233-243, February.
  • Handle: RePEc:mcb:jmoncb:v:41:y:2009:i:1:p:233-243
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