Macroeconomic performance of inflation targeting in European and Asian emerging economies

The macroeconomic performance resulting from adopting an inflation targeting policy in emerging economies of Europe and Central Asia are examined. The research includes 26 countries in the period 1997–2019, with a special focus on the period 2008–2019. Our econometric analysis consists of two approa...

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Bibliographic Details
Published inJournal of policy modeling Vol. 44; no. 3; pp. 675 - 700
Main Authors Arsić, Milojko, Mladenović, Zorica, Nojković, Aleksandra
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.05.2022
Subjects
Dynamic panel model
Emerging economies
Inflation targeting
Monetary policy
Propensity score matching
Dynamic panel model
C52
Inflation targeting
E31
E52
Monetary policy
Emerging economies
Propensity score matching
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Summary:The macroeconomic performance resulting from adopting an inflation targeting policy in emerging economies of Europe and Central Asia are examined. The research includes 26 countries in the period 1997–2019, with a special focus on the period 2008–2019. Our econometric analysis consists of two approaches: dynamic panel modeling and propensity score matching. The results suggest that macroeconomic performance has improved due to the inflation targeting monetary framework. We find that a policy of inflation targeting has been effective in reducing the inflation rate, inflation volatility, and GDP volatility. The results are particularly robust for the subperiod that started in 2008. Econometric results suggest that inflation targeting policy did not affect inflation persistence or GDP growth. Our results suggest that inflation targeting improves the macroeconomic performance of developing countries even when they only partially meet the standard requirements for its implementation.
ISSN:0161-8938
1873-8060
DOI:10.1016/j.jpolmod.2022.06.002