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In Search of Successful Inflation Targeting; Evidence From An Inflation Targeting Index

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  • Yanliang Miao

Abstract

In a first attempt to treat inflation targeting (IT) as a continuous variable, we construct IT subindices for 21 full-fledged ITers on three dimensions: flexibility, transparency, and explicitness. Comparing flexibility and transparency we find that (1) the impact of flexibility on both the mean and variation of inflation is more quadratic than that of transparency; (2) after adding the transparency index, the impact of flexibility is no longer significant. The significant and negative association between transparency and the level and variation of inflation is confirmed when we check for robustness by controlling for disinflation stage, subsampling, instrumental variable estimation, and principal component analysis (PCA).

Suggested Citation

  • Yanliang Miao, 2009. "In Search of Successful Inflation Targeting; Evidence From An Inflation Targeting Index," IMF Working Papers 09/148, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/148
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 1-48.
    2. JoAnne Morris & Tonny Lybek, 2004. "Central Bank Governance; A Survey of Boards and Management," IMF Working Papers 04/226, International Monetary Fund.
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    Cited by:

    1. Hans Genberg & Stefan Gerlach, 2010. "Swiss Monetary Policy 2000-2009," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(I), pages 131-165, March.
    2. Balima, Wenéyam Hippolyte & Combes, Jean-Louis & Minea, Alexandru, 2017. "Sovereign debt risk in emerging market economies: Does inflation targeting adoption make any difference?," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 360-377.
    3. Shu Lin & Haichun Ye, 2012. "What to Target? Inflation or Exchange Rate," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1202-1221, April.
    4. Ellyne, Mark & Veller, Carl, 2011. "What is the SARB's inflation targeting policy, and is it appropriate?," MPRA Paper 42134, University Library of Munich, Germany.

    More about this item

    Keywords

    Economic models; Cross country analysis; Inflation; Inflation rates; Monetary policy; Inflation targeting; Transparency; Flexibility; Factor Analysis; central bank; price stability;

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