Navigating the 2022 Inflation Surge: A Comparative Analysis of IT and Non-IT Central Banks

Patrick Imam () and Tigran Poghosyan

No 2025/212, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the effectiveness of inflation targeting (IT) frameworks during the global inflation surge of 2022, a shock primarily driven by large adverse supply side disruptions following the onset of the War in Ukraine. The empirical findings suggest that (de jure) IT frameworks did not systematically deliver better inflation outcomes during this episode. The decline in inflation back towards historical norms was broadly comparable across (de jure) IT and non-IT country groups. While (de jure) IT central banks hiked their policy rates by more than non-IT central banks on average, this did not help with achieving better inflation outcomes. Also, we find no evidence of a more flexible exchange rate after the shock in (de jure) IT central banks. These findings suggest that (de jure) IT does not necessarily imply an advantage for monetary policy, particularly in the face of large, global supply shocks. Further analysis is warranted on how monetary policy frameworks can adapt to an environment characterized by more frequent and persistent supply-side disruptions. While using a de facto classification of IT regimes would be preferable, the absence of a comprehensive database makes this infeasible.

Keywords: Inflation Targeting; Central Bank Credibility; Supply Shocks; IT country; inflation expectation; country group; inflation outcome; effectiveness of inflation targeting; CPI inflation in IT; Inflation; Central bank policy rate; Real effective exchange rates; Global; Middle East (search for similar items in EconPapers)
Pages: 43
Date: 2025-10-24
New Economics Papers: this item is included in nep-cba, nep-cis, nep-mon and nep-tra
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