Inflation Targeting and Real GDP Dynamics: Cross-Country Evidence

Philipp Kartaev (), A. Philippov and Alexey Khazanov
Additional contact information
A. Philippov: New Economic School, Moscow, Russia

Journal of the New Economic Association, 2016, vol. 29, issue 1, 107-128

Abstract: The paper provides the analysis of short-run and long-run effects of inflation targeting policy adoption on real GDP dynamics. We examine the existing econometric approaches to the estimation of these effects, and based on the provided comparative analysis choose the dynamic panel regression methods for our purposes. In order to estimate the effect of inflation targeting adoption we use a dataset of 141 countries for the 1980-2012 period, which includes 2008 crisis to the range, that has been absent in existing papers. In our paper we distinguish between the short-run and long-run effects of inflation targeting adoption, and we obtain a result which is robust to econometric approach. We apply System GMM in order to estimate the model on the dataset of all 141 countries, and we obtain a result that the adoption of inflation targeting policy in general does not affect negatively the GDP dynamics. We also found out that the result could differ between developing and developed countries: while no negative effect is observed for developed economies, there is some evidence of negative impact in developing economies. Based on the provided analysis we conclude that the general notion about the neutrality of monetary policy for real indicators in long-run could hold also for the regimes of the monetary policy. At the same time the difference in the results for developed and developing economics leaves space for future research.

Keywords: monetary policy; economic growth; inflation targeting; panel data (search for similar items in EconPapers)
JEL-codes: C23 E52 O42 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.econorus.org/repec/journl/2016-29-107-128r.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2016:i:29:p:107-128

Access Statistics for this article

Journal of the New Economic Association is currently edited by Victor Polterovich and Aleksandr Rubinshtein

More articles in Journal of the New Economic Association from New Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Alexey Tcharykov ().