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Inflation targeting and inflation performance: a comparative analysis

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Abstract:

This article examines how the impact of inflation targeting on inflation performance depends on the choice of country samples, adoption dates, time periods and methodological approaches. We apply two different estimation methods – difference-in-differences and propensity score matching – for our sample of 25 advanced and 59 emerging and developing countries over the period 1985 to 2011. Our findings suggest that distinguishing countries by economic development is crucial, as no effect of inflation targeting is found for advanced economies, whereas the results suggest a significant negative effect of inflation targeting on inflation in emerging and developing countries. The results are robust to the methodology used for the analysis.

Keywords: E31; E52; E58; difference-in-differences estimation; inflation; inflation targeting; propensity score matching

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2013.829205

Affiliations: Faculty of Economics and Business, University of Groningen, Groningen, The Netherlands

Publication date: January 2, 2014

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