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Inflation Targeting and its Effects on Macroeconomic Performance

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  • Morten Balling
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Abstract

An increasing number of countries have adopted inflation targeting since New Zealand first adopted this framework in early 1990. Currently there are 21 countries using inflation targeting in every continent of the world. This paper discusses the characteristics of these countries and how the adoption of inflation targeting has affected their economic performance along several dimensions. The main conclusion is that inflation targeting has largely been a success. The new framework has made central banks, which previously lacked credibility, able to change the way they conduct monetary policy towards what is commonly considered best practice. In many respects they have even been leading in creating a new benchmark for how to formulate monetary policy.

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This book is provided by SUERF - The European Money and Finance Forum in its series SUERF Studies with number 2005/5 and published in 2005.
ISBN: 978-3-902109-30-9
Handle: RePEc:erf:erfstu:38
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Keywords: Inflation targeting; Monetary policy.;

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Find related papers by JEL classification:
  • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
  • 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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  1. Edwin M. Truman, 2003. "Inflation Targeting in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 346.
  2. Alexander W. Hoffmaister, 1999. "Inflation Targeting in Korea; An Empirical Exploration," IMF Working Papers 99/7, International Monetary Fund.
  3. Norman Loayza & Raimundo Soto, 2001. "Ten Years of Inflation Targeting: Design, Performance, Challenges," Working Papers Central Bank of Chile 131, Central Bank of Chile.
  4. Ricardo Brogi & Paolo Santella, 2004. "Two New Measures of Bankruptcy Efficiency," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  5. 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.
  6. Benjamin M. Friedman & Kenneth N. Kuttner, 1996. "A price target for U.S. monetary policy? Lessons from the experience with money growth targets," Working Paper Series, Macroeconomic Issues WP-96-14, Federal Reserve Bank of Chicago.
  7. Manfred J. M. Neumann & Jurgen Von Hagen, 2002. "Does inflation targeting matter?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 127-148.
  8. Mishkin, Frederic S. & Savastano, Miguel A., 2001. "Monetary policy strategies for Latin America," Policy Research Working Paper Series 2685, The World Bank.
  9. Miguel A Savastano & Paul R Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  10. Andrew Powell & Martin Gonzalez Rozada & Verónica Cohen Sabbán, 2003. "A new test for the success of inflation targeting," Business School Working Papers trece, Universidad Torcuato Di Tella.
  11. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
  12. Andrew T. Levin & Fabio M. Natalucci & Jeremy M. Piger, 2004. "The macroeconomic effects of inflation targeting," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 51-80.
  13. George A. Kahn & Klara Parrish, 1998. "Conducting monetary policy with inflation targets," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-32.
  14. Rich, Georg, 2000. "Monetary Policy without Central Bank Money: A Swiss Perspective," International Finance, Wiley Blackwell, vol. 3(3), pages 439-69, November.
  15. Mark Zelmer & Andrea Schaechter, 2000. "Adopting Inflation Targeting; Practical Issues for Emerging Market Countries," IMF Occasional Papers 202, International Monetary Fund.
  16. Pierre L. Siklos, 1999. "Inflation-target design: changing inflation performance and persistence in industrial countries," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 46-58.
  17. Kenneth N. Kuttner & Adam S. Posen, 2000. "Inflation, Monetary Transparency, and G3 Exchange Rate Volatility," Working Paper Series WP00-6, Peterson Institute for International Economics.
  18. Alexandre Lamfalussy, 2004. "Financial Globalisation and Financial Market Integration in Europe: Challenges Ahead for the European System of Central Banks," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
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Cited by:

  1. Marco Airaudo & Luis-Felipe Zanna, 2005. "Interest rate rules, endogenous cycles, and chaotic dynamics in open economies," International Finance Discussion Papers 849, Board of Governors of the Federal Reserve System (U.S.).
  2. Weneyam Hippolyte Balima & Jean-Louis Combes & Alexandru Minea, 2015. "Sovereign Debt Risk in Emerging Countries: Does Inflation Targeting Adoption Make Any Difference?," Working Papers halshs-01128239, HAL.
  3. Minea, Alexandru & Tapsoba, René, 2014. "Does inflation targeting improve fiscal discipline?," Journal of International Money and Finance, Elsevier, vol. 40(C), pages 185-203.
  4. Heinz Handler, 2008. "From the Bancor to the Euro. And Further on to the Intor?," WIFO Working Papers 317, WIFO.
  5. Cesar R Sobrino, 2010. "The Effects of Inflation Targeting on the Current Account: An Empirical Examination," Economics Bulletin, AccessEcon, vol. 30(2), pages 1105-1112.

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