Inflation Targeting in Western Europe
32 Pages Posted: 6 Jul 2005
Date Written: June 23, 2005
Abstract
Several European countries adopted inflation targeting as a monetary policy strategy during the 1990s. We evaluate the impact of the establishment of this policy framework on the dynamics of inflation for three countries: United Kingdom, Spain and Finland. We find that inflation targeting was not the most important factor behind the decline of their monthly and quarterly inflation volatilities throughout the 90s. The existence of more benign macroeconomic shocks during this period was more important in such decline. We find however that, in the case of the United Kingdom, the more aggressive monetary policy stance against inflation during the inflation targeting period was the most important factor behind the decline in the volatility of trend inflation.
Keywords: Inflation Targeting, Europe, Central Bank Policy, Structural Analysis, Shocks, Propagation
JEL Classification: E31, E32, E42, E58
Suggested Citation: Suggested Citation