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Inflation Targeting and Inflation Behavior: A Successful Story?

Author

Listed:
  • Marco Vega

    (Central Bank of Peru & London School of Economics)

  • Diego Winkelried

    (Cambridge University)

Abstract

This paper estimates the effects of inflation targeting (IT) adoption over inflation dynamics using a wide control group. We contribute to the current IT evaluation literature by considering the adoption of IT by a country as a treatment, just as in the program evaluation literature. Hence, we perform propensity score matching to determine suitable counterfactuals to the actual inflation targeters. With this approach we find that IT has helped in reducing the level and volatility of inflation in the countries that adopted it. This result is robust to alternative definitions of treatment and control groups. We also find that the e ect of IT in the persistence of inflation is rather weak and not as categorical as the one associated with the mean and volatility of inflation.

Suggested Citation

  • Marco Vega & Diego Winkelried, 2005. "Inflation Targeting and Inflation Behavior: A Successful Story?," Macroeconomics 0502026, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0502026
    Note: Type of Document - pdf; pages: 18
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    More about this item

    Keywords

    Inflation Targeting; matching methods;

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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