What to Target? Inflation or Exchange Rate

Shu Lin and Haichun Ye

Southern Economic Journal, 2012, vol. 78, issue 4, 1202-1221

Abstract: This study empirically compares, for the first time, the popular exchange‐rate–targeting regime with the recently emerged inflation‐targeting framework in developing countries. Applying a variety of propensity score matching methods and dynamic panel generalized method of moments (GMM) regressions to a sample of 50 developing countries for the years 1990–2006, we find strong and robust evidence that, compared to exchange‐rate targeting, inflation targeting leads to a significantly lower inflation rate, and the lower inflation rate does not come at a cost of slower growth.

Date: 2012
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https://doi.org/10.4284/0038-4038-78.4.1202

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Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:78:y:2012:i:4:p:1202-1221

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