Anticipation of central banks' adoption of inflation targeting and its effect on inflation
We construct an empirical test of whether the anticipation of adoption of inflation targeting affects the inflation rate. We observe that most of the central banks adopt the regime after first achieving significant disinflation. With pre-inflation-targeting-disinflation, initial targets are met with...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2023-06-01
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| Series: | Central Bank Review |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S1303070123000136 |
| _version_ | 1797783584986103808 |
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| author | Amlendu Dubey Akanksha Mishra |
| author_facet | Amlendu Dubey Akanksha Mishra |
| author_sort | Amlendu Dubey |
| collection | DOAJ |
| description | We construct an empirical test of whether the anticipation of adoption of inflation targeting affects the inflation rate. We observe that most of the central banks adopt the regime after first achieving significant disinflation. With pre-inflation-targeting-disinflation, initial targets are met with success and the new regime gains credibility. Working with data for 114 emerging market, advanced and low-income economies, we identify the effect using forward-looking dynamic panel data models in a difference-in-difference framework. We find that inflation targeting is successful in locking-in already low inflation rather than reducing high inflation. The analysis has important implications for central banks looking forward to adoption of inflation targeting. |
| first_indexed | 2024-03-13T00:27:58Z |
| format | Article |
| id | doaj.art-48462923f69645e0bf1618a66dca4ab0 |
| institution | Directory Open Access Journal |
| issn | 1303-0701 |
| language | English |
| last_indexed | 2024-03-13T00:27:58Z |
| publishDate | 2023-06-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Central Bank Review |
| spelling | doaj.art-48462923f69645e0bf1618a66dca4ab02023-07-11T04:06:17ZengElsevierCentral Bank Review1303-07012023-06-01232100118Anticipation of central banks' adoption of inflation targeting and its effect on inflationAmlendu Dubey0Akanksha Mishra1Corresponding author.; Indian Institute of Technology Delhi, Hauz Khas, New Delhi, 110016, IndiaIndian Institute of Technology Delhi, Hauz Khas, New Delhi, 110016, IndiaWe construct an empirical test of whether the anticipation of adoption of inflation targeting affects the inflation rate. We observe that most of the central banks adopt the regime after first achieving significant disinflation. With pre-inflation-targeting-disinflation, initial targets are met with success and the new regime gains credibility. Working with data for 114 emerging market, advanced and low-income economies, we identify the effect using forward-looking dynamic panel data models in a difference-in-difference framework. We find that inflation targeting is successful in locking-in already low inflation rather than reducing high inflation. The analysis has important implications for central banks looking forward to adoption of inflation targeting.http://www.sciencedirect.com/science/article/pii/S1303070123000136E52E58E31C22 |
| spellingShingle | Amlendu Dubey Akanksha Mishra Anticipation of central banks' adoption of inflation targeting and its effect on inflation Central Bank Review E52 E58 E31 C22 |
| title | Anticipation of central banks' adoption of inflation targeting and its effect on inflation |
| title_full | Anticipation of central banks' adoption of inflation targeting and its effect on inflation |
| title_fullStr | Anticipation of central banks' adoption of inflation targeting and its effect on inflation |
| title_full_unstemmed | Anticipation of central banks' adoption of inflation targeting and its effect on inflation |
| title_short | Anticipation of central banks' adoption of inflation targeting and its effect on inflation |
| title_sort | anticipation of central banks adoption of inflation targeting and its effect on inflation |
| topic | E52 E58 E31 C22 |
| url | http://www.sciencedirect.com/science/article/pii/S1303070123000136 |
| work_keys_str_mv | AT amlendudubey anticipationofcentralbanksadoptionofinflationtargetinganditseffectoninflation AT akankshamishra anticipationofcentralbanksadoptionofinflationtargetinganditseffectoninflation |