What Can Low-Income Countries Expect from Adopting Inflation Targeting?

 
Author/Editor: Gemayel, Edward R. ; Jahan, Sarwat ; Peter, Alexandra
 
Publication Date: November 01, 2011
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Inflation targeting (IT) is a relatively new monetary policy framework for low-income countries (LICs). The limited number of LICs with an IT framework and the short time that has elapsed since the adoption of this framework explains why there are no previous empirical studies on the performance of IT in LICs. This paper has made a first attempt at filling this gap. It finds that inflation targeting appears to be associated with lower inflation and inflation volatility. At the same time, there is no robust evidence of an adverse impact on output. This may explain the appeal of IT for many LICs, where building credibility of monetary policy is difficult and minimizing output costs of reducing inflation is imperative for social and political reasons.
 
Series: Working Paper No. 11/276
Subject(s): Albania | Armenia | Cross country analysis | Developed countries | Emerging markets | Ghana | Inflation targeting | Low-income developing countries | Monetary policy

Author's Keyword(s): Monetary Policy | Low-Income Countries
 
English
Publication Date: November 01, 2011
Format: Paper
Stock No: WPIEA2011276 Pages: 44
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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