Inflation Targeting and Inflation Behavior: A Successful Story?

Marco Vega () and Diego Winkelried ()

Abstract: This paper estimates the effects of inflation targeting (IT) adoption over inflation dynamics using a wide control group. We contribute to the current IT evaluation literature by considering the adoption of IT by a country as a treatment, just as in the program evaluation literature. Hence, we perform propensity score matching to determine suitable counterfactuals to the actual inflation targeters. With this approach we find that IT has helped in reducing the level and volatility of inflation in the countries that adopted it. This result is robust to alternative definitions of treatment and control groups. We also find that the e ect of IT in the persistence of inflation is rather weak and not as categorical as the one associated with the mean and volatility of inflation.

Keywords: Inflation Targeting; matching methods (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2005-02-16
Note: Type of Document - pdf; pages: 18
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http://129.3.20.41/eps/mac/papers/0502/0502026.pdf (application/pdf)

Related works:
Working Paper: Inflation Targeting and Inflation Behavior: A Successful Story? (2004)
Journal Article: Inflation Targeting and Inflation Behavior: A Successful Story? (2005)
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