Inflation Targeting and Inflation Persistence
This paper argues that the adoption of an inflation target reduces the persistence of inflation.We develop the theoretical literature on inflation persistence by introducing a Taylor rule for monetary policy into a model of persistence and showing that inflation targets reduce inflation persistence. We investigate changes in the time series properties of inflation in seven countries that introduced inflation targets in the late 1980s or early 1990s. We find that the persistence of inflation is greatly reduced or eliminated following the introduction of inflation targets.
|Date of creation:||May 2002|
|Date of revision:|
|Contact details of provider:|| Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK|
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- Baxa, Jaromír & Horváth, Roman & Vašíček, Bořek, 2014.
"How Does Monetary Policy Change? Evidence On Inflation-Targeting Countries,"
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- Jaromír Baxa & Roman Horváth & Bořek Vašíček, 2010. "How Does Monetary Policy Change? Evidence on Inflation Targeting Countries," Working Papers IES 2010/26, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2010.
- Jaromír Baxa & Roman Horváth & Borek Vasícek, 2010. "How Does Monetary Policy Change? Evidence on Inflation Targeting Countries," Working Papers wpdea1007, Department of Applied Economics at Universitat Autonoma of Barcelona.
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- Benati, Luca, 2008. "Investigating inflation persistence across monetary regimes," Working Paper Series 0851, European Central Bank.
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