Inflation Targeting in Emerging Economies: Panel Evidence
Posted: 10 May 2010
Date Written: April 2, 2010
This paper shows there is no evidence that the inflation targeting regime (IT) improves economic performance as measured by the behavior of inflation and output growth in developing countries. The control of common time effects results in less negative and less significant IT impacts on inflation, inflation volatility and output growth volatility than previously found in the literature. Additionally, our analysis shows robust evidence of lower output growth during IT adoption. On balance, although lower long-run mean inflation signals that the central banks of emerging economies with inflation targeting are more inflation-averse, the costs of disinflation have not been lower than under other monetary regimes.
Keywords: Inflation targeting, Inflation, Output growth, Emerging Economies
JEL Classification: E52, E58
Suggested Citation: Suggested Citation