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Inflation targeting and inflation convergence: International evidence

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  • Arestis, Philip
  • Chortareas, Georgios
  • Magkonis, Georgios
  • Moschos, Demetrios

Abstract

We examine whether the inflation rates of the countries that pursue inflation targeting policies have converged as opposed to the experience of the OECD non-inflation targeters. Using a methodology introduced by Pesaran (2007a), we examine the stationarity properties of the inflation differentials. This approach has the advantage of avoiding setting arbitrarily a specific country as the benchmark economy. Our results indicate that the inflation rates converge irrespective of the monetary policy framework.

Suggested Citation

  • Arestis, Philip & Chortareas, Georgios & Magkonis, Georgios & Moschos, Demetrios, 2014. "Inflation targeting and inflation convergence: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 285-295.
    • Handle: RePEc:eee:intfin:v:31:y:2014:i:c:p:285-295
    DOI: 10.1016/j.intfin.2014.04.002
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    More about this item

    Keywords

    Inflation targeting; Inflation convergence; Pair-wise approach; Unit roots;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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