What is it about?
The paper examines the macroeconomic effects of inflation targeting in 44 emerging market economies during 1970-2017. The main findings from our empirical investigation are as follows: inflation targeting is associated with lower average inflation, though its favorable effects, as compared to the alternative monetary strategies, are negligible; we provide firm evidence against the proposition that inflation targeting lowers inflation volatility; there is no evidence whatsoever that inflation targeting has favorable effects on output growth; we find that inflation targeting does not affect output growth volatility.
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Why is it important?
We estimate a dynamic panel data model, which takes into account the endogeneity of inflation targeting regime and controls for a variety of factors affecting macroeconomic performance in EMEs.
Perspectives
This paper adds another piece of evidence that inflation targeting need not deliver the presumed beneficial macroeconomic effects, implying that cannot be viewed as a superior monetary policy strategy for emerging markets.
Goran Petrevski
Saints Cyril and Methodius University in Skopje
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This page is a summary of: Macroeconomic effects of inflation targeting in emerging market economies, Empirical Economics, November 2020, Springer Science + Business Media,
DOI: 10.1007/s00181-020-01987-0.
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