Inflation-targeting and inflation volatility: International evidence from the cosine-squared cepstrum

Nikolaos Antonakakis, Christina Christou, Luis Gil-Alana and Rangan Gupta

International Economics, 2021, issue 167, 29-38

Abstract: Existing empirical evidence on the effect of inflation-targeting on inflation volatility is, at best, mixed. However, comparing inflation volatility across alternative monetary policy regimes, i.e., pre- and post-inflation-targeting, begs the question. The question is not whether the volatility of inflation has changed, but instead whether the volatility is different than it otherwise would have been. Given this, our paper uses the cosine-squared cepstrum to provide overwhelming international evidence that inflation targeting has indeed reduced inflation volatility in 22 out of the 24 countries considered in our sample of established inflation-targeters, than it would have been the case if the central banks in these countries did not decide to set a target for inflation.

Keywords: Cosine-squared cepstrum; Inflation-targeting; Inflation volatility (search for similar items in EconPapers)
JEL-codes: C22 C65 E42 E64 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Journal Article: Inflation-targeting and inflation volatility: International evidence from the cosine-squared cepstrum (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepiie:2021-q3-167-12

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