Re-evaluating the effectiveness of inflation targeting

Ardakani, Omid M.; Kishor, N. Kundan; Song, Suyong

doi:10.1016/j.jedc.2018.01.045

Cited by 39 publications

(35 citation statements)

References 43 publications

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“…This category includes all the countries present in "soft" and "full-fledged IT list", as well as three countries for which there is no consensus in the literature: Japan, India and the United States. Indeed, almost all the studies devoted to IT exclude these three countries, including recent studies such as Ardakania, Kishorb, and Song (2018) or Ilzetzki, Reinhart, and Rogoff (Forthcoming). The main argument used not to consider these countries as ITers comes from the importance given to price stability.…”

Section: Data and Descriptive Statisticsmentioning

confidence: 99%

Does inflation targeting always matter for the ERPT? A robust approach

López-Villavicencio

Pourroy

2019

Journal of Macroeconomics

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This paper estimates the effects of different forms of inflation targeting (IT) in the exchange rate pass-through (ERPT). To this end, we first estimate the ERPT for a large sample of countries using state-space models. We then consider the adoption of an inflation targeting framework by a country as a treatment to find suitable counterfactuals to the actual targeters. By controlling for self-selection bias and endogeneity of the monetary policy regime, we confirm that the ERPT tends to be lower for countries adopting explicit IT. However, we uncover that older regimes, adopting a range or point with tolerance band and keeping inflation close to the target, outperform other IT regimes. We also show that IT is effective even with a relatively high inflation target or low central bank independence. JEL Classification: E31; E42; E52; C30.

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Section: Data and Descriptive Statisticsmentioning

confidence: 99%

Does inflation targeting always matter for the ERPT? A robust approach

López-Villavicencio

Pourroy

2019

Journal of Macroeconomics

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“…This result is not surprising since the central bank independence is widely considered as a precondition of the IT adoption. Furthermore, lagged Broad Money to GDP ratio is negatively associated with the probability of adopting IT strategy, as in [38]. Along the same line of argument, the stronger the lagged Trade Openness or lagged Political Stability Index, the lower the probability for a country in a certain year to adopt IT strategy.…”

Section: Baseline Modelmentioning

confidence: 85%

“…It is defined as a business activity hidden from public authorities in order to avoid paying taxes, fees, and social contributions and was found to be a key driver for the level of inflation by reference [37]. We follow reference [38] and introduce in the baseline model lagged covariates. A summary statistics is presented in Table 1.…”

Section: The Datamentioning

confidence: 99%

Assessing the Sustainability of Inflation Targeting: Evidence from EU Countries with Non-EURO Currencies

Străchinaru

Dumitrescu

2019

Sustainability

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This paper examines the impact of inflation targeting (IT) adoption on macroeconomic outcomes (unemployment, inflation, exchange rate, and its volatility) and banking concentration by comparing the non-EUR European countries that adopt an IT strategy to non-EUR European countries that do not adopt an IT strategy for the period of 2005–2015. The results suggest that IT has no impact on inflation, unemployment, and the exchange rate raises the systemic risk. Moreover, in non-IT countries, central banks are more concerned to minimizing the exchange rate volatility to better protect the debtors with foreign currency (EURO) loans.

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“…Their empirical analysis showed that, normally, adopting inflation targeting had a significant and remarkable effect on reducing the budget deficit. Ardakani et al (2018) estimated the effect of inflation targeting on macroeconomic variables using the semi-parametric Propensity Score Matching method. Their results showed that there was no significant difference in inflation rate and inflation fluctuations between inflation targeting and non-inflation targeting countries.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Inflation Targeting on Direct Taxes in Selected Countries: A Propensity Score Matching (PSM) Approach

Zaroomi

Samimi

Potanlar

2020

International Journal of Economics and Politics

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Inflation targeting is a prevalent economic policy that is applied increasingly by countries. In addition, the effect of inflation targeting on macroeconomic variables is also been considered recently which mostly uses econometric models. One of the most important issues in this regard is that evaluating the effectiveness of inflation targeting usually confronted with bias in econometric models. In order to solve this problem, it is suggested the Propensity Score Matching Method (PSM) which has been used recently by economists. In this paper, it is tried to investigate the impact of inflation targeting on direct taxes and its components in a selected collection of two groups of oil importer and exporter countries by Propensity Score Matching Method (PSM) during 1990-2016 years. The results show that adopting inflation targeting framework has a positive and significant effect on tax revenue in oil importer countries; whereas the impact of this policy in oil exporter countries is statistically insignificant and its direction is also ambiguous.

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Re-evaluating the effectiveness of inflation targeting

Cited by 39 publications

References 43 publications

Does inflation targeting always matter for the ERPT? A robust approach

Does inflation targeting always matter for the ERPT? A robust approach

Assessing the Sustainability of Inflation Targeting: Evidence from EU Countries with Non-EURO Currencies

The Impact of Inflation Targeting on Direct Taxes in Selected Countries: A Propensity Score Matching (PSM) Approach

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