Has Inflation Targeting Changed Monetary Policy Preferences?

Jerome Creel and Paul Hubert ()
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Paul Hubert: Observatoire Français des Conjonctures Économiques, Postal: 69, Quai d'Orsay, Paris 75007, France

No 2010-14, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: The literature on inflation targeting has up to now focused on its impact on macroeconomic performance or private expectations. In contrast, this paper proposes to investigate empirically whether the institutional adoption of this framework has changed the policy preferences of the central banker. We test the hypothesis that inflation targeting has constituted a switch towards a greater focus on inflation. We use three complementary methods: a structural break analysis, time-varying parameters and Markov-Switching VAR which make possible to estimate linear or nonlinear, and forward or backward looking specifications, to account for heteroskedasticity without having to assume a date break ex ante. Our main result is that inflation targeting has not led to a stronger response to inflation. We infer that the inflation targeting paradigm should not be confounded with the inflation targeting framework.

Keywords: Monetary Policy; Inflation Targeting; Taylor Rule; Structural Break; Time-Varying coefficients, Markov-Switching VAR (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2010-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: HAS INFLATION TARGETING CHANGED THE CONDUCT OF MONETARY POLICY? (2015)
Working Paper: Has the Adoption of Inflation Targeting Represented a Regime Switch? Empirical evidence from Canada, Sweden and the UK (2008)
Working Paper: Has the Adoption of Inflation Targeting Represented a Regime Switch? Empirical evidence from Canada, Sweden and the UK (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:1014

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