Inflation Targeting and Inflation Persistence

George Bratsiotis (), Jakob Madsen and Christopher Martin

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: This paper argues that the adoption of an inflation target reduces the persistence of inflation. We develop the theoretical literature on inflation persistence by introducing a Taylor Rule for monetary policy into a model of persistence and showing that inflation targets reduce inflation persistence. We investigate changes in the time series properties of inflation in seven countries that introduced inflation targets in the late 1980s or early 1990s. We find that the persistence of inflation is greatly reduced or eliminated following the introduction of inflation targets.

Pages: 18 pages
Date: 2015
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Inflation Targeting and Inflation Persistence (2002)
Working Paper: Inflation Targeting and Inflation Persistence (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:211

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