Inflation targeting and financial market volatility

Roisin O'Sullivan and Marc Tomljanovich

Applied Financial Economics, 2012, vol. 22, issue 9, 749-762

Abstract: We construct an inflation-targeting index for a group of seven Organization for Economic Co-operation and Development (OECD) countries that ranks countries according to the key features of formal inflation targeting regimes. The relationship between this index and bond markets is empirically examined to investigate whether inflation targeting reduces the mean of the conditional volatility of the difference between actual yields and those predicted by the expectations hypothesis. We find that the adoption of a more stringent inflation-targeting regime is generally associated with a statistically significant drop in conditional volatility, suggesting that inflation targeting reduces noise in bond markets.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/09603107.2011.625643 (text/html)
Access to full text is restricted to subscribers.

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:taf:apfiec:v:22:y:2012:i:9:p:749-762

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603107.2011.625643

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().