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Inflation targeting in low-income countries: Does IT work?

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  • Michael Bleaney
  • Atsuyoshi Morozumi
  • Zakari Mumuni

Abstract

Previous research on inflation targeting (IT) has focused on high-income countries (HICs) and emerging market economies (EMEs). Only recently has enough data accumulated for the performance of IT in low-income countries (LICs) to be assessed. We show that IT has not so far been as effective in reducing inflation in LICs as in EMEs. Relatively weak institutions, a typical feature of LICs, help explain this result. Our interpretation is that poor institutions, leaving fiscal policy unconstrained, impair central banks’ ability to conduct monetary policy in a way consistent with IT.

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  • Michael Bleaney & Atsuyoshi Morozumi & Zakari Mumuni, 2020. "Inflation targeting in low-income countries: Does IT work?," Discussion Papers 2020-01, University of Nottingham, CREDIT.
    • Handle: RePEc:not:notcre:20/01
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    5. PINSHI, Christian P., 2022. "Inflation-Forecast Targeting: A New Framework for Monetary Policy?," MPRA Paper 111709, University Library of Munich, Germany.
    6. Sonan Memon & Irfan A. Qureshi, 2021. "Income inequality and macroeconomic instability," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 758-789, May.

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    Inflation targeting; Low-income countries; Institutions;
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