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The Impact of Central Bank Independence on The Performance of Inflation Targeting Regimes : Emerging Economies

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  • Abdelkader Aguir

    (PACTE - Pacte, Laboratoire de sciences sociales - UPMF - Université Pierre Mendès France - Grenoble 2 - UJF - Université Joseph Fourier - Grenoble 1 - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique, MOFID-Université de Sousse)

Abstract

This paper examines the mac ro economic effects of inflation targeting on inflation in emerging economies. It focuses on both theoretical and empirical analysis of the inflation targeting regime. However, when we differentiate the impact of inflation targeting based on the degree of central bank independence, we find large effects in emerging economies wit h low central bank independence. Our results therefore suggest that central bank independence is not a prerequisite for emerging economies to experience significant declines in inflation following the adoption of inflation targeting. Furthermore, we provide evidence that one channel through which inflation targeting lowers inflation and lowers volatility of inflation more in countries with low central bank independence is the reduction of budget deficits following the adoption of an inflation target.

Suggested Citation

  • Abdelkader Aguir, 2014. "The Impact of Central Bank Independence on The Performance of Inflation Targeting Regimes : Emerging Economies," Post-Print hal-03825933, HAL.
    • Handle: RePEc:hal:journl:hal-03825933
    Note: View the original document on HAL open archive server: https://hal.science/hal-03825933
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    References listed on IDEAS

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