Inflation Targeting Does Not Matter: Another Look at OECD Sacrifice Ratios
Journal of Money, Credit and Banking, Vol. 42, No. 8 (December 2010)
17 Pages Posted: 8 Jul 2020
Date Written: April 23, 2010
Recently in this journal, Gonçalves and Carvalho (2009) concluded that inflation targeters were able to bring inflation down at less cost than nontargeters (p. 242). This comment shows that their conclusion is not robust, but instead is the result of comparing a particular subset of IT disinflations with non-simultaneous disinflations that occurred under very different macroeconomic conditions. In their sample, simple extensions like justifiably varying the treatment group of inflation targeting disinflations, to control for common time-varying effects or to control for the Maastricht Treaty effects, suggest that inflation targeting does not matter.
Keywords: inflation targeting, sacrifice ratio
JEL Classification: E42, E52
Suggested Citation: Suggested Citation