What Can Low-Income Countries Expect From Adopting Inflation Targeting?
IMF Working Papers, November 1, 2011
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Bibliographic details
- Authors: Alexandra Born, Sarwat Jahan, Edward R Gemayel
- Published: November 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463925932.001
Summary and scope
- 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 since adoption explain the absence of previous empirical studies on IT performance in LICs.
- This paper makes a first attempt to fill that empirical gap.
Key findings
- Inflation targeting appears to be associated with lower inflation.
- Inflation targeting appears to be associated with lower inflation volatility.
- There is no robust evidence of an adverse impact on output.
- These findings 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.
Subjects and keywords
- Subjects: Emerging and frontier financial markets, Financial markets, Inflation, Inflation targeting, Monetary policy, Monetary policy frameworks, Monetary transmission mechanism, Prices
- Keywords: adoption date, control group, Emerging and frontier financial markets, Global, Inflation, Inflation targeting, inflation targeting dummy, inflation volatility, inflation-targeting infrastructure, IT adoption, IT country, IT framework, Low-Income Countries, monetary policy, Monetary Policy, Monetary policy frameworks, Monetary transmission mechanism, WP