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Effects of adopting inflation targeting regimes on inflation variability

✍ Scribed by Hakan Berument; Ebru Yuksel

Publisher
Elsevier Science
Year
2007
Tongue
English
Weight
162 KB
Volume
375
Category
Article
ISSN
0378-4371

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✦ Synopsis

This paper investigates whether inflation-targeting programs have altered the pattern of inflation and its variability for five developed countries and four emerging economies implementing inflation-targeting programs. A GARCH specification is used to model inflation variability, which accounts for public perception of the future levels of inflation variability-conditional variance. We could not find lower conditional inflation expectations except for Australia, Chile and Sweden under various specifications. Moreover, the conditional variance decreases only for Chile and the UK. Therefore, the empirical support for the lower inflation and its variability for the inflation targeting regimes is limited.

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## Abstract We study the effects of growth volatility and inflation volatility on average rates of output growth and inflation for post‐war US data. Our results suggest that increased growth uncertainty is associated with significantly lower average growth, while higher inflation uncertainty is sig