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Inflation targeting and the cyclicality of monetary policy

John Thornton () and Chrysovalantis Vasilakis

Finance Research Letters, 2017, vol. 20, issue C, 296-302

Abstract: We assess whether the adoption of inflation targeting (IT) frameworks has facilitated countercyclical monetary policies in a sample of 90 industrial and developing economies, 22 of which have adopted IT. Using propensity score matching methods, we show that the average treatment effect of IT has a statistically significant and quantitatively quite large effect in facilitating a more countercyclical monetary policy in IT adopting countries.

Keywords: Inflation targeting; Monetary policy cyclicality; Treatment effect; Propensity score matching (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2017
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