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Does Inflation Targeting Matter?

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Author Info
Laurence Ball
Niamh Sheridan

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Abstract

This paper asks whether inflation targeting improves economic performance, as measured by the behavior of inflation, output, and interest rates. We compare seven OECD countries that adopted inflation targeting in the early 1990s to thirteen that did not. After the early 90s, performance improved along many dimensions for both the targeting countries and the non-targeters. In some cases the targeters improved by more; for example, average inflation fell by a larger amount. However, these differences are explained by the facts that targeters performed worse than non-targeters before the early 90s, and there is regression to the mean. Once one controls for regression to the mean, there is no evidence that inflation targeting improves performance.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9577.

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Date of creation: Mar 2003
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Handle: RePEc:nbr:nberwo:9577

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E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Svensson, Lars E O, 1995. "The Swedish Experience of an Inflation Target," CEPR Discussion Papers 1103, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Stephen G. Cecchetti & Michael Ehrmann, 1999. "Does Inflation Targeting Increase Output Volatility? An International Comparison of Policymakers' Preferences and Outcomes," NBER Working Papers 7426, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Andrea Schaechter & Marc Zelmer, 2000. "Adopting Inflation Targeting: Practical Issues for Emerging Market Countries," IMF Occasional Papers 202, International Monetary Fund.
  4. Frederic S. Mishkin, 2002. "Does inflation targeting matter? - commentary," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 149-154. [Downloadable!]
  5. Manfred J.M. Neumann & Jrgen von Hagen, 2002. "Does inflation targeting matter?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 127-148. [Downloadable!]
  6. Oscar Landerretche & Vittorio Corbo & Klaus Schmidt-Hebbel, 2001. "Does Inflation Targeting Make a Difference," Working Papers Central Bank of Chile 106, Central Bank of Chile. [Downloadable!]
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  7. Ball, Laurence, 1999. "Efficient Rules for Monetary Policy," International Finance, Blackwell Publishing, vol. 2(1), pages 63-83, April. [Downloadable!] (restricted)
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  8. Eric V. Clifton & H. L. Leon & Chorng-Huey Wong, 2001. "Inflation Targeting and the Unemployment-Inflation Trade-off," IMF Working Papers 01/166, International Monetary Fund. [Downloadable!]
  9. Frederic S. Mishkin, 1999. "International Experiences with Different Monetary Policy Regimes," NBER Working Papers 6965, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Johnson, David R., 2002. "The effect of inflation targeting on the behavior of expected inflation: evidence from an 11 country panel," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1521-1538, November. [Downloadable!] (restricted)
  11. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June. [Downloadable!] (restricted)
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  12. Kenneth N. Kuttner & Adam S. Posen, 1999. "Does talk matter after all? Inflation targeting and central bank behavior," Staff Reports 88, Federal Reserve Bank of New York. [Downloadable!]
  13. Laurence M. Ball, 1997. "Disinflation and the NAIRU," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 167-194 National Bureau of Economic Research, Inc. [Downloadable!]
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