Inflation Targeting and Inflation Behavior: A Successful Story?
Marco Vegaa and Diego Winkelriedb
This paper estimates the effects of inflation targeting (IT)
adoption over inflation dynamics using a wide control group.
We contribute to the current IT evaluation literature by considering
the adoption of IT by a country as a treatment, just
as in the program evaluation literature. Hence, we perform
propensity score matching to find suitable counterfactuals to
the actual inflation targeters. We find out that IT has helped
in reducing the level and volatility of inflation in the countries
that adopted it. This result is robust to alternative definitions
of treatment and control groups.
JEL Codes: C50, E42, E52.
Full article (PDF, 23 pages 205 kb)
a London School of Economics and Central Bank of Peru
b St. Edmundís College, University of Cambridge