Does Inflation Targeting Make a Difference?

Frederic Mishkin and Klaus Schmidt-Hebbel

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: Yes, as inferred from panel evidence for inflation-targeting countries and a control group of high-achieving industrial countries that do not target inflation. Our evidence suggests that inflation targeting helps countries achieve lower inflation in the long run, have a smaller inflation response to oil-price and exchange-rate shocks, strengthen monetary policy independence, improve monetary policy efficiency, and obtain inflation outcomes closer to target levels. Some benefits of inflation targeting are larger when inflation targeters have achieved disinflation and are able to make their inflation targets stationary. Despite these favorable results for inflation targeting, our evidence generally does not suggest that countries that adopt inflation targeting have attained better monetary policy performance relative to our control group of highly successful non-inflation targeters. However, inflation targeting does seem to help all country groups to move toward the performance of the control group. The performance attained by industrial-country inflation targeters generally dominates the performance of emerging-economy inflation targeters and is similar to that of industrial non-inflation targeting countries.

Keywords: Inflation targeting; monetary policy. (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2006-12
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Citations: View citations in EconPapers (48)

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Related works:
Chapter: Does Inflation Targeting Make a Difference? (2007)
Working Paper: Does Inflation Targeting Make a Difference? (2007)
Working Paper: Does Inflation Targeting Make a Difference? (2006)
Chapter: Does Inflation Targeting Make a Difference? (2002)
Working Paper: Does Inflation Targeting Make a Difference (2001)
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