Assessing the Performance of Inflation Targeting Lite Countries

25 Pages Posted: 5 Nov 2007

See all articles by Alvaro Angeriz

Alvaro Angeriz

University of Cambridge - Department of Applied Economics

Philip Arestis

University of Cambridge - Department of Land Economy; Universidad del País Vasco (UPV/EHU)

Abstract

This paper deals with what is referred to in the literature as the 'Inflation Targeting Lite' (ITL) countries. These are a category of emerging countries, whose main characteristics are that they are least developed and small economies that pursue IT. They use inflation targeting to define their monetary policy framework, but for a number of reasons they are not in a position to put top priority to IT in relation to other objectives. This paper deals with a set of ITL countries for which consistent data could be gathered, and for which a date for setting inflation targeting could be discerned. The object of the paper is to study the impact of IT on actual inflation and inflation expectations. We utilise intervention analysis to time series on inflation for a number of ITL countries, which have actually implemented IT. In doing so our main concern is to assess whether, due to the IT intervention, there has been a significant change in the trend corresponding to these series and the extent to which inflation rates have actually been 'locked-in' at low levels after the implementation of IT. Two major results emerge. The first is that ITL countries have been successful in 'locking-in' inflation rates. The second is that non-IT countries have also been successful in terms of the 'lock-in' effect. Our overall conclusion, then, is that other factors in addition to IT underpin the apparent success of the control of inflation.

Suggested Citation

Angeriz, Alvaro and Arestis, Philip, Assessing the Performance of Inflation Targeting Lite Countries. The World Economy, Vol. 30, No. 11, pp. 1621-1645 November 2007. Available at SSRN: https://ssrn.com/abstract=1026745 or http://dx.doi.org/10.1111/j.1467-9701.2007.01056.x

Alvaro Angeriz (Contact Author)

University of Cambridge - Department of Applied Economics ( email )

Sidgwick Avenue
Cambridge, CB3 9DE
United Kingdom

Philip Arestis

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Universidad del País Vasco (UPV/EHU)

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

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