Does inflation targeting matter? A reassessment

Luke Willard

Applied Economics, 2012, vol. 44, issue 17, 2231-2244

Abstract: A number of countries have adopted the policy of inflation targeting and a substantial literature exists on the virtues of inflation targeting in reducing inflation (Bernanke et al ., 1999). However, results in the existing empirical literature conflict. This article uses a number of identification approaches (instrumental variables, assumptions about heteroscedasticity, panel-fixed effects and a potential natural experiment) to estimate the effect of inflation targeting on inflation for a sample of Organization for Economic Co-operation and Development (OECD) countries. Generally, it finds that the effect is small and insignificant. It also finds little evidence that inflation variability, inflation uncertainty, inflation volatility or inflation expectations fall with targeting suggesting that inflation targeting does not affect a number of variables likely to be of interest to policy makers.

Date: 2012
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Citations: View citations in EconPapers (49)

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Working Paper: Does Inflation Targeting Matter? A Reassessment (2011)
Working Paper: Does Inflation Targeting Matter? A Reassessment (2006)
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DOI: 10.1080/00036846.2011.564136

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