Inflation Targeting Framework: Is the story different for Asian Economies?

Bushra Naqvi and Syed Kumail Abbas Rizvi ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims to measure and compare the economic performance of four Asian economies who adopted Inflation Targeting (Indonesia, Philippines, South Korea and Thailand) against their six neighboring Asian non-targeting economies (China, Hong Kong, India, Malaysia, Singapore and Pakistan). Using the methodology of Ball and Sheridan, firstly, behavior of inflation, output growth and short term interest rate has been measured for both groups (Targeters vs. Non-Targeters) in pre and post IT adoption period in order to see whether performance has improved in targeting countries after the adoption of IT. Secondly, we try to find out whether Inflation Targeting has played any significant role in the changed behavior of these variables. Thirdly, we measure the effect of output gap and supply shock on inflation and see whether economic structure of these countries has changed between pre and post targeting period; and then we measure the role of IT in the structural change of these economies if there is any. The results force us to believe that economic performance has improved in all Asian economies in post targeting period. However, IT does not seem to play any significant role in this improvement of targeting countries. In addition to this, we find strong evidence that all variables showed strong reversion to mean suggesting that improved performance of variables today is in fact the outcome of poor economic performance in the past.

Keywords: Inflation Targeting; Asian countries; Output gap; Targeters vs Non Targeters; Economic Performance (search for similar items in EconPapers)
JEL-codes: E30 E31 E52 E58 (search for similar items in EconPapers)
Date: 2009-06-01
New Economics Papers: this item is included in nep-mac, nep-mon and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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