Inflation targeting and the cyclicality of monetary policy

John Thornton; Chrysovalantis Vasilakis

doi:10.1016/j.frl.2016.10.012

Inflation targeting and the cyclicality of monetary policy

The Albert Gubay Business School

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Abstract

We assess whether the adoption of inflation targeting (IT) frameworks has facilitated countercyclical monetary policies in a sample of 90 industrial and developing economies, 22 of which have adopted IT. Using propensity score matching methods, we show that the average treatment effect of IT has a statistically significant and quantitatively quite large effect in facilitating a more countercyclical monetary policy in IT adopting countries.

Original language	English
Pages (from-to)	296-302
Journal	Finance Research Letters
Volume	20
Early online date	28 Oct 2016
DOIs	https://doi.org/10.1016/j.frl.2016.10.012
Publication status	Published - Feb 2017

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2017 Inflation targeting and the cyclicality of monetary policy_Revised_FRLsAccepted author manuscript, 1.66 MBLicence: CC BY-NC-ND

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abstract = "We assess whether the adoption of inflation targeting (IT) frameworks has facilitated countercyclical monetary policies in a sample of 90 industrial and developing economies, 22 of which have adopted IT. Using propensity score matching methods, we show that the average treatment effect of IT has a statistically significant and quantitatively quite large effect in facilitating a more countercyclical monetary policy in IT adopting countries.",

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AB - We assess whether the adoption of inflation targeting (IT) frameworks has facilitated countercyclical monetary policies in a sample of 90 industrial and developing economies, 22 of which have adopted IT. Using propensity score matching methods, we show that the average treatment effect of IT has a statistically significant and quantitatively quite large effect in facilitating a more countercyclical monetary policy in IT adopting countries.

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Inflation targeting and the cyclicality of monetary policy

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