Does Inflation Targeting Matter?

50 Pages Posted: 20 Mar 2003 Last revised: 1 Nov 2010

See all articles by Laurence Ball

Laurence Ball

Johns Hopkins University - Department of Economics; National Bureau of Economic Research (NBER); International Monetary Fund (IMF)

Niamh Sheridan

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2003

Abstract

This paper asks whether inflation targeting improves economic performance, as measured by the behavior of inflation, output, and interest rates. We compare seven OECD countries that adopted inflation targeting in the early 1990s to thirteen that did not. After the early 90s, performance improved along many dimensions for both the targeting countries and the non-targeters. In some cases the targeters improved by more; for example, average inflation fell by a larger amount. However, these differences are explained by the facts that targeters performed worse than non-targeters before the early 90s, and there is regression to the mean. Once one controls for regression to the mean, there is no evidence that inflation targeting improves performance.

Suggested Citation

Ball, Laurence M. and Sheridan, Niamh, Does Inflation Targeting Matter? (March 2003). NBER Working Paper No. w9577. Available at SSRN: https://ssrn.com/abstract=389448

Laurence M. Ball (Contact Author)

Johns Hopkins University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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International Monetary Fund (IMF) ( email )

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Niamh Sheridan

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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