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Assessing the Sustainability of Inflation Targeting: Evidence from EU Countries with Non-EURO Currencies

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  • Adina Ionela Străchinaru

    (Department of Money and Banking, Bucharest University of Economic Studies, 010961 Bucharest, Romania)

  • Bogdan Andrei Dumitrescu

    (Department of Money and Banking and Center of Financial and Monetary Research CEFIMO, Bucharest University of Economic Studies, 010961 Bucharest, Romania)

Abstract

This paper examines the impact of inflation targeting (IT) adoption on macroeconomic outcomes (unemployment, inflation, exchange rate, and its volatility) and banking concentration by comparing the non-EUR European countries that adopt an IT strategy to non-EUR European countries that do not adopt an IT strategy for the period of 2005–2015. The results suggest that IT has no impact on inflation, unemployment, and the exchange rate raises the systemic risk. Moreover, in non-IT countries, central banks are more concerned to minimizing the exchange rate volatility to better protect the debtors with foreign currency (EURO) loans.

Suggested Citation

  • Adina Ionela Străchinaru & Bogdan Andrei Dumitrescu, 2019. "Assessing the Sustainability of Inflation Targeting: Evidence from EU Countries with Non-EURO Currencies," Sustainability, MDPI, vol. 11(20), pages 1-13, October.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:20:p:5654-:d:276184
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    1. Meral KAGITCI & Leonardo BADEA & Vasile Cosmin NICULA, 2021. "The Catch-up Effect of Economic Growth. Evidence from the European Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 76-86, December.
    2. Piotr Nowaczyk & Joanna Hernik, 2020. "Adopting the Euro will Cause an Increase in Prices: A Study on Inflationary Processes in Euro Area Member States," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 377-403.

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