On the Endogeneity of Inflation Targeting: Preferences Over Inflation

33 Pages Posted: 14 Jun 2011

See all articles by Nicolás de Roux

Nicolás de Roux

Universidad de los Andes - Department of Economics

Marc Hofstetter

Universidad de los Andes

Date Written: February 8, 2011

Abstract

Over the last quarter of a century, inflation targeting has become a popular monetary regime. Nevertheless, empirical evaluations of IT have shown contradictory results. Part of the reason is that IT in and of itself constitutes an endogenous decision and thus needs to be properly instrumented. In this paper, we show that preferences over inflation constitute a crucial determinant of IT: countries exhibiting greater inflation aversion are more likely to adopt IT.

Keywords: inflation targeting, monetary policy, monetary regimes

JEL Classification: E31, E52, E58, E61

Suggested Citation

de Roux, Nicolás and Hofstetter, Marc, On the Endogeneity of Inflation Targeting: Preferences Over Inflation (February 8, 2011). Documento CEDE No. 2011-06, Available at SSRN: https://ssrn.com/abstract=1862210 or http://dx.doi.org/10.2139/ssrn.1862210

Nicolás De Roux (Contact Author)

Universidad de los Andes - Department of Economics ( email )

Carrera 1a No. 18A-10
Bogota, AA4976
Colombia

Marc Hofstetter

Universidad de los Andes ( email )

Carrera Primera # 18A-12
Bogota, DC D.C. 110311
Colombia

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