NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Does Inflation Targeting Matter?

Laurence Ball, Niamh Sheridan

NBER Working Paper No. 9577
Issued in March 2003
NBER Program(s):   EFG   ME

This paper asks whether inflation targeting improves economic performance, as measured by the behavior of inflation, output, and interest rates. We compare seven OECD countries that adopted inflation targeting in the early 1990s to thirteen that did not. After the early 90s, performance improved along many dimensions for both the targeting countries and the non-targeters. In some cases the targeters improved by more; for example, average inflation fell by a larger amount. However, these differences are explained by the facts that targeters performed worse than non-targeters before the early 90s, and there is regression to the mean. Once one controls for regression to the mean, there is no evidence that inflation targeting improves performance.

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Document Object Identifier (DOI): 10.3386/w9577

Published:

  • Bernanke, Ben S. and Michael Woodford (eds.) The Inflation-Targeting Debate (National Bureau of Economic Research Studies in Income and Wealth). University Of Chicago Press, November 1, 2006. ,
  • Does Inflation Targeting Matter? , Laurence M. Ball, Niamh Sheridan. in The Inflation-Targeting Debate, Bernanke and Woodford. 2005

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