What to Target? Inflation or Exchange Rate
This study empirically compares, for the first time, the popular exchange-rate–targeting regime with the recently emerged inflation-targeting framework in developing countries. Applying a variety of propensity score matching methods and dynamic panel generalized method of moments (GMM) regressions to a sample of 50 developing countries for the years 1990–2006, we find strong and robust evidence that, compared to exchange-rate targeting, inflation targeting leads to a significantly lower inflation rate, and the lower inflation rate does not come at a cost of slower growth.
Volume (Year): 78 (2012)
Issue (Month): 4 (April)
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