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Can inflation targeting help to absorb shocks from natural disasters ?
[Le ciblage de l’inflation, absorbeur des chocs dus à des catastrophes naturelles ?]

Author

Listed:
  • Christoph Grosse Steffen
  • Marcel Fratzscher
  • Malte Rieth

Abstract

Countries that adopt a strict inflation target experience stronger growth and lower inflation after large natural disaster shocks. Inflation targeting can hence serve as an important shock absorber thanks mainly to a different policy mix. The results indicate that relaxing the inflation targeting regime might generate potential costs, since the stabilisation of future recessions might become more difficult. Dans les pays en ciblage strict de l’inflation, la croissance est plus soutenue et l’inflation plus faible après de grands chocs dus à des catastrophes naturelles. Le ciblage de l’inflation peut donc être un important amortisseur de chocs, essentiellement grâce un policy mix différent. Une flexibilisation du régime de ciblage pourrait rendre la stabilisation des futures récessions plus difficile.

Suggested Citation

  • Christoph Grosse Steffen & Marcel Fratzscher & Malte Rieth, 2018. "Can inflation targeting help to absorb shocks from natural disasters ? [Le ciblage de l’inflation, absorbeur des chocs dus à des catastrophes naturelles ?]," Eco Notepad 72, Banque de France.
    • Handle: RePEc:bfr:econot:72
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