Re-Evaluating the Effectiveness of Inflation Targeting

50 Pages Posted: 3 Sep 2018

See all articles by Omid M. Ardakani

Omid M. Ardakani

Georgia Southern University

Narayan K. Kishor

University of Wisconsin - Milwaukee

Suyong Song

University of Iowa

Date Written: August 24, 2018

Abstract

This paper estimates the treatment effect of inflation targeting on macroeconomic variables using a semiparametric single index method by taking into account the model misspecification of parametric propensity scores. Our study uses a broader set of preconditions for inflation targeting and macroeconomic outcome variables than the existing literature. The results suggest no significant difference in the inflation level and inflation volatility between targeters and non-targeters after the adoption of inflation targeting. We find that inflation targeting reduces sacrifice ratio and interest rate volatility in the developed economies, and that it enhances fiscal discipline in both the industrial and developing countries.

Keywords: Inflation Targeting, Propensity Score, Treatment Effects, Single Index Model

JEL Classification: C14, E4, E5

Suggested Citation

M. Ardakani, Omid and Kishor, N. Kundan and Song, Suyong, Re-Evaluating the Effectiveness of Inflation Targeting (August 24, 2018). Available at SSRN: https://ssrn.com/abstract=3238084 or http://dx.doi.org/10.2139/ssrn.3238084

Omid M. Ardakani (Contact Author)

Georgia Southern University ( email )

11935 Abercorn St.
Savannah, GA 31419
United States
9123443163 (Phone)

N. Kundan Kishor

University of Wisconsin - Milwaukee ( email )

Bolton Hall 802
3210 N. Maryland Ave.
Milwaukee, WI 53211
United States

Suyong Song

University of Iowa ( email )

W360 Pappajohn Business Building
21 E Market St
Iowa City, IA 52242
United States

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