The Effects of Inflation Targeting for Financial Development

The adoption of inflation targeting (IT) by central banks leads to an increase of 10 to 20 percent in measures of financial development, with a lag. We also find evidence that the financial sector benefits of IT adoption were higher for early-adopting central banks. Our results suggest that roughly...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Dunbar, Geoffrey R, Amy, Li, Qijia
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2019
Subjects
Central banks
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Summary:The adoption of inflation targeting (IT) by central banks leads to an increase of 10 to 20 percent in measures of financial development, with a lag. We also find evidence that the financial sector benefits of IT adoption were higher for early-adopting central banks. Our results suggest that roughly 12 to 14 years after the Reserve Bank of New Zealand adopted inflation targeting in 1989, the benefits for financial development for new adopters of inflation targeting may have been negligible.