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Flexible Inflation Targeting and Macroeconomic Performance: Evidence from ASEAN

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  • Nuwat Nookhwun
  • Rawipha Waiyawatjakorn

Abstract

The experience of flexible inflation targeting in ASEAN-5 has been favorable. This paper shows improvements in macroeconomic outcomes consistent with the framework’s mandated objectives: lower levels and volatility of inflation, more stable economic growth and a well-functioning financial system. Using difference-in-difference approaches, we find that, for ASEAN-5 and developing countries, the inflation targeting framework mainly benefits adopters in terms of reducing inflation levels. In response to the challenges emanating from capital flow volatility and domestic financial imbalances, over the past 20 years, ASEAN-5 policy frameworks have continuously evolved to incorporate various policy tools. These include, among others, foreign exchange intervention, macroprudential policy, and capital flow measures. A multitude of policy tools is arguably one of the key factors contributing to sound macroeconomic outcomes during the post-targeting periods.

Suggested Citation

  • Nuwat Nookhwun & Rawipha Waiyawatjakorn, 2023. "Flexible Inflation Targeting and Macroeconomic Performance: Evidence from ASEAN," PIER Discussion Papers 208, Puey Ungphakorn Institute for Economic Research, revised Jan 2024.
    • Handle: RePEc:pui:dpaper:208
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    More about this item

    Keywords

    flexible inflation targeting; monetary policy; ASEAN; financial stability; integrated policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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