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Does Inflation Targeting Matter?

In: The Inflation-Targeting Debate

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  • Laurence M. Ball
  • Niamh Sheridan

Abstract

This paper asks whether inflation targeting improves economic performance, as measured by the behavior of inflation, output, and interest rates. We compare seven OECD countries that adopted inflation targeting in the early 1990s to thirteen that did not. After the early 90s, performance improved along many dimensions for both the targeting countries and the non-targeters. In some cases the targeters improved by more; for example, average inflation fell by a larger amount. However, these differences are explained by the facts that targeters performed worse than non-targeters before the early 90s, and there is regression to the mean. Once one controls for regression to the mean, there is no evidence that inflation targeting improves performance.
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Suggested Citation

  • Laurence M. Ball & Niamh Sheridan, 2004. "Does Inflation Targeting Matter?," NBER Chapters, in: The Inflation-Targeting Debate, pages 249-276, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:9561
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    References listed on IDEAS

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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