Does Inflation Targeting Matter? A Reassessment

Luke Byrne Willard (1)

1 Economics Department

A number of countries have adopted inflation targeting and a substantial literature exists on the virtues of inflation targeting in reducing inflation (e.g. Bernanke et al. (1999)). However, results in the existing empirical literature conflict. This paper uses a number of identification approaches (instrumental variables, assumptions about heteroscedasticity, panel fixed effects and a potential natural experiment) to estimate the effect of inflation targeting on inflation for a sample of OECD countries. Generally, it finds the effect is small and insignificant. It also finds little evidence that inflation variability, inflation uncertainty, inflation volatility or inflation expectations fall with targeting suggesting that inflation targeting does not affect a number of variables likely to be of interest to policy makers.

Mots clés: Social Sciences & Humanities

Domaines: Économie et finance quantitative [q-fin]

Luke Byrne Willard. Does Inflation Targeting Matter? A Reassessment. Applied Economics, 2011, pp.1. ⟨10.1080/00036846.2011.564136⟩. ⟨hal-00688942⟩