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

Inflation control around the world: Why are some contries more successful than others?

  • Thórarinn G. Pétursson
Registered author(s):

    This paper focuses on two important questions concerning inflation performance in a country sample of forty-two of the most developed countries in the world. The firrst is why inflation tends to be more volatile in some countries than in others, in particular in very small, open economies and emerging market economies compared to the large and more developed ones. The empirical analysis suggests that the volatility of the risk premium in multilateral exchange rates, the degree of exchange rate pass-through to inflation, and monetary policy predictability play a key role in explaining the cross-country variation in inflation volatility. Other variables, related to economic development and size, international trade, output volatility, exposure to external shocks, and central bank independence are not found significant. The second question is what explains the general decline in inflation volatility over the sample period. Using a panel approach, the empirical analysis confirms that the adoption of inflation targeting has played a critical role in this improvement in addition to the three variables found important in the cross-country analysis. Inflation targeting therefore continues to play an important role in reducing inflation volatility even after adding the three controls to the panel analysis. The main conclusions are found to be robust to changes in the country sample and to different estimation methods.

    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.sedlabanki.is/lisalib/getfile.aspx?itemid=7216
    Download Restriction: no

    Paper provided by Department of Economics, Central bank of Iceland in its series Economics with number wp42.

    as
    in new window

    Length:
    Date of creation: Jul 2009
    Date of revision:
    Handle: RePEc:ice:wpaper:wp42
    Contact details of provider: Postal: Kalkofnsvegi 1, 150 Reykjavik
    Phone: 569-9600
    Fax: 569-9605
    Web page: http://www.sedlabanki.is/
    Email:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    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:ice:wpaper:wp42. 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: (Central Bank of Iceland)

    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.