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What Should Central Banks Target? Evidence on the Impact of Monetary Policy Regimes on Economic Growth

Terence Tai Leung Chong and Kin Ming Wong ()

MPRA Paper from University Library of Munich, Germany

Abstract: Economists and policy-makers have long sought the ideal framework for monetary policy as it is arguably one of the most important tools for government to influence the economy. Exchange rate and inflation are believed to be the most appealing anchors for providing guidance to the conduct of monetary policy and are thus widely used in the real world. Most existing studies on the effect of exchange-rate arrangements and inflation targeting on economic growth suffer from the absence of a clear counterfactual, rendering it difficult to interpret their results. Based on a new classification scheme on monetary policy regimes, this paper helps to fill that gap by investigating the effect of monetary policy regimes on growth. Our results consistently support that an inflation targeting regime has a positive impact on economic growth when compared with an exchange-rate targeting regime.

Keywords: Monetary Policy Regimes; Inflation Targeting; Exchange-rate Targeting; Economic Growth (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 F43 (search for similar items in EconPapers)
Date: 2015-04-07
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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