Macroeconomic effects of inflation targeting in emerging market economies

Martin Stojanovikj and Goran Petrevski

Empirical Economics, 2021, vol. 61, issue 5, No 9, 2539-2585

Abstract: Abstract This paper examines the macroeconomic effects of inflation targeting in 44 emerging market economies (EMEs) during 1970–2017. We estimate a dynamic panel data model, taking into account the endogeneity of the inflation targeting regime and controlling for a variety of factors affecting macroeconomic performance in EMEs. The main findings from our empirical investigation are as follows: First, inflation targeting is associated with lower average inflation, though its favorable effects, as compared to alternative monetary strategies, are negligible; second, we provide firm evidence against the proposition that inflation targeting lowers inflation volatility. Our results are robust with respect to various modifications in the estimation procedure and to the inclusion of additional control variables.

Keywords: Inflation targeting; Dynamic panel data models; Emerging market economies; General method of moments (search for similar items in EconPapers)
JEL-codes: C23 E52 E58 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s00181-020-01987-0

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