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Assessing Inflation Targeting in Latin America With a DSGE Model

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  • John McDermott
  • Peter McMenamin

Abstract

In this paper we assess Inflation Targeting with a unique treatment and control group of strictly Latin American countries. We estimate a small Dynamic Stochastic General Equilibrium model to determine whether economic behavior within an economy fundamentally changes under Inflation Targeting. We find that although Inflation Targeting central banks appear to be if anything, slightly more aggressive in responding to inflation than Non-Inflation Targeting central banks, this has not resulted in more forward looking inflation expectations by economic agents.

Suggested Citation

  • John McDermott & Peter McMenamin, 2008. "Assessing Inflation Targeting in Latin America With a DSGE Model," Working Papers Central Bank of Chile 469, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:469
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    17. Harold Glenn A. Valera & Mark J. Holmes & Gazi M. Hassan, 2018. "Is inflation targeting credible in Asia? A panel GARCH approach," Empirical Economics, Springer, vol. 54(2), pages 523-546, March.
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