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Flexible Inflation Targeting and Macroeconomic Performance: Evidence from ASEAN

Nuwat Nookhwun and Rawipha Waiyawatjakorn

No 208, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: The experience of flexible inflation targeting in ASEAN-5 has been favorable. This paper shows improvements in macroeconomic outcomes consistent with the framework’s mandated objectives: lower levels and volatility of inflation, more stable economic growth and a well-functioning financial system. Using difference-in-difference approaches, we find that, for ASEAN-5 and developing countries, the inflation targeting framework mainly benefits adopters in terms of reducing inflation levels. In response to the challenges emanating from capital flow volatility and domestic financial imbalances, over the past 20 years, ASEAN-5 policy frameworks have continuously evolved to incorporate various policy tools. These include, among others, foreign exchange intervention, macroprudential policy, and capital flow measures. A multitude of policy tools is arguably one of the key factors contributing to sound macroeconomic outcomes during the post-targeting periods.

Keywords: flexible inflation targeting; monetary policy; ASEAN; financial stability; integrated policy (search for similar items in EconPapers)
JEL-codes: D78 E52 E58 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2023-10, Revised 2024-01
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mon and nep-sea
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