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An Investigation of Output Variance Before and During Inflation Targeting

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  • Francisco d Nadal De Simone

Abstract

Since Taylor estimated a trade-off between inflation and output variance, it has been widely accepted that efforts to keep the inflation rate “too low and stable” will likely result in relatively larger output fluctuations. Following the generalized reduction in inflation variance in the 1990s, that concern was rekindled. This study estimates whether conditional output variance has changed in a sample of 12 countries. With the possible exception of Canada, there is no evidence of an increase in output variance. Either output variance has not changed (i.e., in Korea and Singapore) or has fallen (i.e., in Australia and New Zealand).

Suggested Citation

  • Francisco d Nadal De Simone, 2001. "An Investigation of Output Variance Before and During Inflation Targeting," IMF Working Papers 01/215, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:01/215
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    Cited by:

    1. Robert Buckle & David Haugh & Peter Thomson, 2003. "Calm after the storm? Supply-side contributions to New Zealand's GDP volatility decline," New Zealand Economic Papers, Taylor & Francis Journals, vol. 37(2), pages 217-243.
    2. Ivrendi, Mehmet & Guloglu, Bulent, 2010. "Monetary shocks, exchange rates and trade balances: Evidence from inflation targeting countries," Economic Modelling, Elsevier, vol. 27(5), pages 1144-1155, September.
    3. Yifan Hu, 2003. "Empirical Investigations of Inflation Targeting," Working Paper Series WP03-6, Peterson Institute for International Economics.
    4. Grand Nathalie & Dropsy Vincent, 2005. "Exchange Rate And Inflation Targeting In Morocco And Tunisia," Macroeconomics 0507018, EconWPA.
    5. Marjan Petreski, 2009. "A Critique On Inflation Targeting," Journal Articles, Center For Economic Analyses, pages 11-24, December.
    6. Marjan Petreski, 2012. "Output Volatility and Exchange Rate Considerations Under Inflation Targeting : A Review," International Journal of Economics and Financial Issues, Econjournals, vol. 2(4), pages 528-537.

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