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The choice of adopting inflation targeting in emerging economies: Do domestic institutions matter?

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  • Yannick Lucotte

    () (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)

Abstract

Over the last decade, a growing number of emerging countries has adopted inflation targeting as monetary policy framework. In a recent paper, Freedman and Laxton (2009) ask the question “Why Inflation Targeting?”. This paper empirically investigates this question by analyzing a large set of institutional and political factors potentially associated with a country's choice of adopting IT. Using panel data on a sample of thirty inflation targeting and non-inflation emerging countries, for the period 1980-2006, our results suggest that central bank independence, policy-makers' incentives, and characteristics of political system play an important role in the choice of IT, while the level of financial development and political stability do not seem to matter. Empirical findings are confirmed by extensive robustness tests.

Suggested Citation

  • Yannick Lucotte, 2010. "The choice of adopting inflation targeting in emerging economies: Do domestic institutions matter?," Post-Print hal-00539713, HAL.
  • Handle: RePEc:hal:journl:hal-00539713
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00539713
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    Cited by:

    1. Hanna Samaryna & Jakob de Haan, 2011. "Right on Target: Exploring the Determinants of Inflation Targeting Adoption," DNB Working Papers 321, Netherlands Central Bank, Research Department.
    2. Valera, Harold Glenn A. & Holmes, Mark J. & Hassan, Gazi M., 2017. "How credible is inflation targeting in Asia? A quantile unit root perspective," Economic Modelling, Elsevier, vol. 60(C), pages 194-210.
    3. repec:spr:empeco:v:54:y:2018:i:2:d:10.1007_s00181-016-1212-3 is not listed on IDEAS
    4. Anna Samarina & Jakob De Haan, 2014. "Right On Target: Exploring The Factors Leading To Inflation Targeting Adoption," Contemporary Economic Policy, Western Economic Association International, vol. 32(2), pages 372-389, April.
    5. repec:jed:journl:v:42:y:2017:i:2:p:67-86 is not listed on IDEAS

    More about this item

    Keywords

    Inflation targeting; central bank independence; financial development; political institutions; emerging countries;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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