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The lag in effect of inflation targeting and policy evaluation

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  • WenShwo Fang
  • Stephen Miller

Abstract

The lag in effect of monetary policy contains vital information for the policy evaluation. Allowing for a time-varying treatment effect, we show that Inflation Targeting (IT) effectively lowers inflation for both developed and developing countries. Developed countries reach their targets rapidly with a 2-year lag in effect. Developing countries, however, reduce inflation gradually towards their targets and do not reach their ultimate goal by the end year of 2007.

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  • WenShwo Fang & Stephen Miller, 2011. "The lag in effect of inflation targeting and policy evaluation," Applied Economics Letters, Taylor & Francis Journals, vol. 18(14), pages 1371-1375.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:14:p:1371-1375
    DOI: 10.1080/13504851.2010.537624
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    Cited by:

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    2. Balima, Wenéyam Hippolyte & Combes, Jean-Louis & Minea, Alexandru, 2017. "Sovereign debt risk in emerging market economies: Does inflation targeting adoption make any difference?," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 360-377.
    3. Apeti, Ablam Estel & Edoh, Eyah Denise, 2023. "Tax revenue and mobile money in developing countries," Journal of Development Economics, Elsevier, vol. 161(C).
    4. Xiang Deng & Zhi Huang & Xiang Cheng, 2019. "FinTech and Sustainable Development: Evidence from China Based on P2P Data," Sustainability, MDPI, vol. 11(22), pages 1-19, November.
    5. Kadria, Mohamed & Ben Aissa, Mohamed Safouane, 2016. "Inflation targeting and public deficit in emerging countries: A time varying treatment effect approach," Economic Modelling, Elsevier, vol. 52(PA), pages 108-114.
    6. Bambe, Bao-We-Wal & Combes, Jean-Louis & Kaba, Kabinet & Minea, Alexandru, 2024. "Inflation targeting and firm performance in developing countries," Journal of Economic Dynamics and Control, Elsevier, vol. 163(C).
    7. Balima, Hippolyte W. & Kilama, Eric G. & Tapsoba, René, 2020. "Inflation targeting: Genuine effects or publication selection bias?," European Economic Review, Elsevier, vol. 128(C).
    8. Nikolaos Antonakakis & Christina Christou & Luis A. Gil-Alana & Rangan Gupta, 2020. "Inflation-Targeting and Inflation Volatility: International Evidence from the Cosine-Squared Cepstrum," Working Papers 202021, University of Pretoria, Department of Economics.
    9. Nikolaos Antonakakis & Christina Christou & Luis A. Gil-Alana & Rangan Gupta, 2021. "Inflation-targeting and inflation volatility: International evidence from the cosine-squared cepstrum," International Economics, CEPII research center, issue 167, pages 29-38.
    10. Rangan Gupta, 2011. "Growth-Effects of Inflation Targeting: The Role of Financial Sector Development," Annals of Economics and Finance, Society for AEF, vol. 12(1), pages 65-87, May.
    11. Hippolyte W. BALIMA & Eric Gabin KILAMA & René TAPSOBA, 2017. "Settling the Inflation Targeting Debate: Lights from a Meta-Regression Analysis," Working Papers 4080, FERDI.
    12. Bao We Wal Bambe & Jean-Louis Combes & Kabinet Kaba & Alexandru Minea, 2024. "Inflation targeting and firm performance in developing countries," Post-Print hal-04734823, HAL.
    13. Jean-Louis Combes & Rasmane Ouedraogo & Sampawende J.-A. Tapsoba, 2016. "Structural shifts in aid dependency and fiscal policy in developing countries," Applied Economics, Taylor & Francis Journals, vol. 48(46), pages 4426-4446, October.
    14. Jean-Louis Combes & Rasmané Ouedraogo & Mr. Sampawende J Tapsoba, 2016. "What Does Aid Do to Fiscal Policy? New Evidence," IMF Working Papers 2016/112, International Monetary Fund.

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    More about this item

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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