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Inflation Targeting and Output Growth: Empirical Evidence for the European Union

Author/Editor: Apergis, Nicholas | Miller, Stephen M. | Panethimitakis, Alexandros | Vamvakidis, Athanasios
Authorized for Distribution: May 1, 2005
Electronic Access: Free Full Text (PDF file size is 402KB)
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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: This paper evaluates the performance of two alternative policy rules, a forward-looking rule and a spontaneous adjustment rule, under alternative inflation targets, in terms of output losses in a macroeconomic model, using European Union data. The simulations suggest that forward-looking rules contribute to macroeconomic stability and monetary policy credibility, and that a positive inflation target, as opposed to zero inflation, leads to higher and less volatile output. These results are robust to changes in the specification of the model and time period. The same methodology applied to individual countries supports country-specific flexible inflation targeting.
 
Series: Working Paper No. 05/89
Subject(s): Inflation targeting | European Union | Economic growth
Author's keyword(s): Inflation targeting | European Union
 
English  
    Published:   May 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005089   Pages:   27
    Price:   US$15.00
       
     
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