Inflation Targeting Does Not Matter: Another Look at OECD Economies’ Output Sacrifice Ratios

Ricardo D. Brito

No 102, Business and Economics Working Papers from Unidade de Negocios e Economia, Insper

Abstract: Recently in this journal, Gonçalves and Carvalho (2009) concluded that inflation targeters were able to bring inflation down at less cost than nontargeters (p. 242). This comment shows that their conclusion is not robust, but instead is the result of comparing a particular subset of IT disinflations with non-simultaneous disinflations that occurred under very different macroeconomic conditions. In their sample, simple extensions like justifiably varying the treatment group of inflation targeting disinflations, to control for common time-varying effects or to control for the Maastricht Treaty effects, prove that inflation targeting does not matter.

Pages: 15 pages
Date: 2010
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