Inflation Targeting and the Unemployment-Inflation Trade-off
This paper examines the impact of the introduction of inflation targeting on the unemployment-inflation trade-off in OECD countries. Theoretical models suggest that the credibility-enhancing effects of the adoption of inflation targeting should cause an improvement in the unemployment-inflation trade-off, i.e., that reducing inflation by a given amount should occur with a smaller rise in unemployment. The empirical evidence examined for OECD countries adopting inflation targeting supports this hypothesis. Using a smooth transition regression model, it is shown that the improvement in this trade-off does not take place immediately after the adoption of inflation targeting; rather, it improves over time as the credibility of the central bank is established.
|Date of creation:||01 Oct 2001|
|Contact details of provider:|| Postal: International Monetary Fund, Washington, DC USA|
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard Clarida & Jordi Gali & Mark Gertler, 1999.
"The Science of Monetary Policy: A New Keynesian Perspective,"
NBER Working Papers
7147, National Bureau of Economic Research, Inc.
- Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
- Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
- W. Wascher & Palle S. Andersen, 1999. "Sacrifice ratios and the conduct of monetary policy in conditions of low inflation," BIS Working Papers 82, Bank for International Settlements.
- Kenneth N. Kuttner & Adam S. Posen, 1999.
"Does Talk Matter After All? Inflation Targeting and Central Bank Behavior,"
Working Paper Series
WP99-10, Peterson Institute for International Economics.
- Kuttner, Kenneth N. & Posen, Adam S., 1999. "Does talk matter after all? Inflation targeting and central bank behavior," CFS Working Paper Series 1999/04, Center for Financial Studies (CFS).
- Kenneth N. Kuttner & Adam S. Posen, 1999. "Does talk matter after all? Inflation targeting and central bank behavior," Staff Reports 88, Federal Reserve Bank of New York.
- Dave Turner & Elena Seghezza, 1999. "Testing for a Common OECD Phillips Curve," OECD Economics Department Working Papers 219, OECD Publishing.
- Mark Zelmer & Andrea Schaechter, 2000. "Adopting Inflation Targeting; Practical Issues for Emerging Market Countries," IMF Occasional Papers 202, International Monetary Fund.
- Skalin, Joakim & Ter svirta, Timo, 2002.
"Modeling Asymmetries And Moving Equilibria In Unemployment Rates,"
Cambridge University Press, vol. 6(02), pages 202-241, April.
- Skalin, Joakim & Teräsvirta, Timo, 1998. "Modelling asymmetries and moving equilibria in unemployment rates," SSE/EFI Working Paper Series in Economics and Finance 262, Stockholm School of Economics, revised 05 Oct 1998.
- By Mohsin S. Khan & Abdelhak S. Senhadji, 2001.
"Threshold Effects in the Relationship Between Inflation and Growth,"
IMF Staff Papers,
Palgrave Macmillan, vol. 48(1), pages 1.
- Abdelhak S Senhadji & Mohsin S. Khan, 2000. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Working Papers 00/110, International Monetary Fund.
- Eric V. Clifton, 1999. "Inflation Targeting; What is the Meaning of the Bottom of the Band?," IMF Policy Discussion Papers 99/8, International Monetary Fund.
- Laurence Ball, 1993.
"What Determines the Sacrifice Ratio?,"
NBER Working Papers
4306, National Bureau of Economic Research, Inc.
- Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
- International Monetary Fund, 1998. "Do IMF-Supported Programs Work? A Survey of the Cross-Country Empirical Evidence," IMF Working Papers 98/169, International Monetary Fund.
- Guy Debelle, 1997.
"Inflation Targeting in Practice,"
IMF Working Papers
97/35, International Monetary Fund.
- van Dijk, Dick & Teräsvirta, Timo & Franses, Philip Hans, 2000.
"Smooth Transition Autoregressive Models - A Survey of Recent Developments,"
SSE/EFI Working Paper Series in Economics and Finance
380, Stockholm School of Economics, revised 17 Jan 2001.
- Dick van Dijk & Timo Terasvirta & Philip Hans Franses, 2002. "Smooth Transition Autoregressive Models — A Survey Of Recent Developments," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 1-47.
- van Dijk, D.J.C. & Terasvirta, T. & Franses, Ph.H.B.F., 2000. "Smooth transition autoregressive models - A survey of recent developments," Econometric Institute Research Papers EI 2000-23/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Adam S. Posen, 1995.
"Central bank independence and disinflationary credibility: a missing link?,"
1, Federal Reserve Bank of New York.
- Posen, Adam, 1998. "Central Bank Independence and Disinflationary Credibility: A Missing Link?," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 335-59, July.
- Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
- Miguel A Savastano & Paul R Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
- Lundbergh, Stefan & Teräsvirta, Timo & van Dijk, Dick, 2000.
"Time-Varying Smooth Transition Autoregressive Models,"
SSE/EFI Working Paper Series in Economics and Finance
376, Stockholm School of Economics.
- Lundbergh, Stefan & Terasvirta, Timo & van Dijk, Dick, 2003. "Time-Varying Smooth Transition Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 104-121, January.
- Laurence Ball & Robert Moffitt, 2001.
"Productivity Growth and the Phillips Curve,"
Economics Working Paper Archive
450, The Johns Hopkins University,Department of Economics.
- DiNardo, J. & Moore, M.P., 1999.
"The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy,"
99-00-04, California Irvine - School of Social Sciences.
- John DiNardo & Mark P. Moore, 1999. "The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy," NBER Working Papers 7328, National Bureau of Economic Research, Inc.
- Ernst Baltensperger & Thomas J. Jordan, 1998. "Are there Shifts in the Output-Inflation Trade-off? The Case of Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 134(II), pages 121-132, June.
- Hutchison, M M & Walsh, C E, 1998. "The Output-Inflation Tradeoff and Central Bank Reform: Evidence from New Zealand," Economic Journal, Royal Economic Society, vol. 108(448), pages 703-25, May.
- Patricia S. Pollard, 1993. "Central bank independence and economic performance," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 21-36.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:01/166. 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: (Jim Beardow)or (Hassan Zaidi)
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.