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Inflation targeting in low-income countries: Does IT work?

Michael Bleaney, Atsuyoshi Morozumi () and Zakari Mumuni

No 2018/08, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: Previous research on inflation targeting (IT) has focused on high-income countries (HICs) and emerging market economies (EMEs). Only recently has enough data accumulated for the performance of IT in low-income countries (LICs) to be assessed. We show that IT has not so far been effective in reducing in inflation in LICs, unlike in EMEs. Weak institutions, a typical feature in LICs, help explain this result, particularly under floating exchange rate regimes. Our interpretation is that poor institutions, leaving fiscal policy unconstrained, impair central banks' ability to conduct monetary policy in a way consistent with IT.

Keywords: inflation targeting; low-income countries; institutions (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-knm, nep-mac and nep-mon
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:18/08

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