Right on Target: Exploring the Determinants of Inflation Targeting Adoption

35 Pages Posted: 10 Nov 2011

See all articles by Anna SamarIna

Anna SamarIna

De Nederlandsche Bank

Jakob de Haan

University of Groningen - Faculty of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute); De Nederlandsche Bank

Date Written: July 1, 2011

Abstract

This paper examines which economic, fiscal, external, financial, and institutional characteristics of countries affect the likelihood that they adopt inflation targeting as their monetary policy strategy. We estimate a panel binary response transition model for 60 countries and two subsamples consisting of OECD and non-OECD countries over the period 1985-2008. The findings suggest that past macroeconomic performance of a country, its fiscal discipline, exchange rate arrangements, as well as the structure and development of its financial system have a significant impact on the likelihood to adopt inflation targeting. However, the determinants of inflation targeting differ between OECD and non-OECD countries.

Keywords: inflation targeting, monetary policy strategy

JEL Classification: E42, E52

Suggested Citation

SamarIna, Anna and de Haan, Jakob, Right on Target: Exploring the Determinants of Inflation Targeting Adoption (July 1, 2011). De Nederlandsche Bank Working Paper No. 321, Available at SSRN: https://ssrn.com/abstract=1957602 or http://dx.doi.org/10.2139/ssrn.1957602

Anna SamarIna (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Jakob De Haan

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

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