Inflation Targeting Mattered: a multivariate synthetic control approach

Ricardo D. Brito (), Robison F. Kudamatsu () and Vladimir K. Teles ()

No 2021_26, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: We use a multivariate synthetic control method that matches the price and output dynamics jointly to evaluate the effects of the inflation targeting regime (IT) on the inflation and output growth of its early adopters (the ITers) – New Zealand, Canada, the United Kingdom, Sweden, and Australia. Once accounting for the inflation-output tradeoff in the conduct of monetary policy, the ITers enjoyed lower inflation and/or higher output growth than their counterfactuals. These performances were economically important to justify IT central banks’ optimism with IT, both case-by-case and on average.

Keywords: Inflation targeting; Multivariate synthetic control (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2021-11-18
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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