IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A Nonparametric Approach to Evaluating Inflation-Targeting Regimes

  • Weshah Razzak and Rabie Nasser

We use a variety of nonparametric test statistics to evaluate the inflation- targeting regimes of Australia, Canada, New Zealand, Sweden and the UK. We argue that a sensible approach of evaluation must rely on a variety of methods, among them parametric and nonparametric econometric methods, for robustness and completeness. Our evaluation strategy is based on examining two possible policy implications of inflation targeting: First, a welfare implication and second, a real variability implication. The welfare implication involves evaluating a utility function, and tested by testing whether (1) the distributions of the levels and the growth rates of private consumption and leisure per capita remained unchanged under inflation targeting, i.e., first-order stochastic dominance; and (2) testing a linear combination of consumption and leisure per capita, where the parameter describing the utility of leisure or the relative preference of leisure is calibrated. Then we introduce nonparametric univariate and multivariate statistical methods to test whether the first and second moments of a variety of real variables, such as the real exchange rate depreciation rate, real GDP per capita growth rate in addition to private consumption per capita and leisure per capita growth rates, remained unchanged under inflation targeting, decreased or increased significantly. There seems to be some evidence of increased welfare under inflation-targeting regimes, but no concrete evidence is found that inflation targeting policy, in general, reduces real variability. Some cross country differences are also found.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.arab-api.org/jodep/products/delivery/wps0901.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify ()


Download Restriction: no

Paper provided by Arab Planning Institute - Kuwait, Information Center in its series API-Working Paper Series with number 0901.

as
in new window

Length:
Date of creation:
Date of revision:
Handle: RePEc:api:apiwps:0901
Contact details of provider: Postal: P.O.Box 5834 Safat , 13059
Phone: (965)4843130
Fax: (965)484293
Web page: http://www.arab-api.org/index.html
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  2. Tommaso Monacelli, 1999. "Into the Mussa Puzzle: Monetary Policy Regimes and the Real Exchange Rate in a Small Open Economy," Boston College Working Papers in Economics 437, Boston College Department of Economics, revised 15 Sep 2000.
  3. Friedman, Milton, 1976. "Inflation and Unemployment," Nobel Prize in Economics documents 1976-1, Nobel Prize Committee.
  4. Stephen Nickell, 2003. "Employment and Taxes," CESifo Working Paper Series 1109, CESifo Group Munich.
  5. Razzak, W. A., 1991. "Target zone exchange rate," Economics Letters, Elsevier, vol. 35(1), pages 63-70, January.
  6. Perron, P., 1989. "Testing For A Unit Root In A Time Series With A Changing Mean," Papers 347, Princeton, Department of Economics - Econometric Research Program.
  7. Mussa, Michael, 1986. "Nominal exchange rate regimes and the behavior of real exchange rates: Evidence and implications," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 117-214, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:api:apiwps:0901. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.