What Can Low-Income Countries Expect from Adopting Inflation Targeting?

45 Pages Posted: 12 Dec 2011

See all articles by Edward Gemayel

Edward Gemayel

International Monetary Fund (IMF) - Middle East and Central Asia Department

Sarwat Jahan

International Monetary Fund (IMF)

Alexandra Peter

affiliation not provided to SSRN

Date Written: November 2011

Abstract

Inflation targeting (IT) is a relatively new monetary policy framework for low-income countries (LICs). The limited number of LICs with an IT framework and the short time that has elapsed since the adoption of this framework explains why there are no previous empirical studies on the performance of IT in LICs. This paper has made a first attempt at filling this gap. It finds that inflation targeting appears to be associated with lower inflation and inflation volatility. At the same time, there is no robust evidence of an adverse impact on output. This may explain the appeal of IT for many LICs, where building credibility of monetary policy is difficult and minimizing output costs of reducing inflation is imperative for social and political reasons.

Keywords: Albania, Armenia, Cross country analysis, Developed countries, Emerging markets, Ghana, Inflation targeting, Low-income developing countries, Monetary policy

Suggested Citation

Gemayel, Edward and Jahan, Sarwat and Peter, Alexandra, What Can Low-Income Countries Expect from Adopting Inflation Targeting? (November 2011). IMF Working Papers, Vol. , pp. 1-44, 2011. Available at SSRN: https://ssrn.com/abstract=1971427

Edward Gemayel (Contact Author)

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Sarwat Jahan

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Alexandra Peter

affiliation not provided to SSRN

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
57
Abstract Views
473
rank
372,162
PlumX Metrics