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The Inflation-Targeting Debate$
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Ben S. Bernanke and Michael Woodford

Print publication date: 2005

Print ISBN-13: 9780226044712

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226044736.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 17 September 2021

Does Inflation Targeting Matter?

Does Inflation Targeting Matter?

(p.249) 6 Does Inflation Targeting Matter?
The Inflation-Targeting Debate

Laurence Ball

Niamh Sheridan

University of Chicago Press

The performance of inflation-targeting regimes has been quite good. Inflation-targeting countries seem to have significantly reduced both the rate of inflation and inflation expectations beyond that which would likely have occurred in the absence of inflation targets. In the United Kingdom, for example, not only has inflation been lower since inflation targeting was introduced, but it has also been more stable than in recent decades. One of the main benefits of inflation targets is that they may help to “lock in” earlier disinflationary gains, particularly in the face of one-time inflationary shocks. This chapter examines the effects of inflation targeting on macroeconomic performance, focusing on the experience of twenty OECD countries. Seven of the countries adopted inflation targeting during the 1990s while thirteen did not. Not surprisingly, economic performance varies greatly across individual countries, both targeters and non-targeters. On average, however, there is no evidence that inflation targeting improves performance as measured by the behavior of inflation, output, or interest rates.

Keywords:   inflation targeting, OECD countries, macroeconomic performance, inflation, output, interest rates

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