Assessing the macroeconomic effects of inflation targeting: Evidence from OECD Economies

Ikram Ben Romdhane and Sami Mensi

MPRA Paper from University Library of Munich, Germany

Abstract: With the numerous monetary policy reforms undertaken during the 1990s, inflation targeting emerged as one of the possible solutions. The macroeconomic performance of this regime has attracted the attention of recent research, yet no final consensus on its role is reached. The aim of this paper is to contribute to this debate through a panoply of mixed results proven by the recent literature. Empirically, the purpose of this study is to assess the impact of inflation targeting on inflation and output based on a panel of 30 OECD countries over the period 1980_2012, using the “differences-in- differences” approach of Ball and Sheridan (2005). Our results indicate that inflation targeting helps to improve macroeconomic performance of targeters OECD countries more than non- targeters in terms of average inflation and volatility. Our findings corroborate previous studies like those of Wu (2004), Ball and Sheridan (2005) and Manai,O (2014). However, our results point to an insignificant impact of this regime on output consistent with Gonçalves- Salles (2008) and Ftiti & Essadi (2013). However, our results contrast those of S-Hebbel (2007) and Ftiti J. Goux (2011) which assume that there is no difference between targeters and non-targeters OECD countries.

Keywords: Inflation targeting; Performance; Macroeconomic Dimensions; Monetary Policy; Panel Analysis. (search for similar items in EconPapers)
JEL-codes: E52 E58 G21 (search for similar items in EconPapers)
Date: 2014-11-21, Revised 2014-11-14
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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