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Inflation Targeting: A three-decade perspective

Salem Abo-Zaid () and Didem Tuzemen ()

Journal of Policy Modeling, 2012, vol. 34, issue 5, 621-645

Abstract: Using cross-country data for developed and developing countries over the period 1980–2007, we study the effects of the Inflation Targeting regime on levels and volatilities of inflation, GDP growth and fiscal imbalances. Our results indicate that the targeting developing countries are associated with lower and more stable inflation, as well as higher and more stable GDP growth. The targeting developed nations experience higher GDP growth and conduct more disciplined fiscal policy after adopting the regime. The improvements in fiscal imbalances may be at least partly attributed to the attempts to achieve an inflation target. We conclude that non-targeting countries, would highly benefit from targeting inflation.

Keywords: Inflation Targeting; Monetary policy; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 E62 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1016/j.jpolmod.2011.08.004

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Handle: RePEc:eee:jpolmo:v:34:y:2012:i:5:p:621-645