TY - BOOK ID - 133422351 TI - Macro Effects of Formal Adoption of Inflation Targeting AU - Bhalla, Surjit. AU - Bhasin, Karan. AU - Loungani, Prakash. PY - 2023 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Macroeconomics KW - Economics: General KW - Inflation KW - Money and Monetary Policy KW - Finance: General KW - Business Fluctuations KW - Cycles KW - Expectations KW - Speculations KW - Price Level KW - Deflation KW - Monetary Policy KW - General Financial Markets: General (includes Measurement and Data) KW - Economic & financial crises & disasters KW - Economics of specific sectors KW - Monetary economics KW - Finance KW - Prices KW - Inflation targeting KW - Monetary policy KW - Emerging and frontier financial markets KW - Financial markets KW - Currency crises KW - Informal sector KW - Economics KW - Financial services industry KW - Mexico UR - https://www.unicat.be/uniCat?func=search&query=sysid:133422351 AB - We examine the impact of formal adoption of inflation targeting (IT) on inflation, growth and anchoring of inflation expectations in advanced economies and emerging markets and developing economies (EMDEs). Our paper reports several findings relevant to assessing the success of IT regimes. We find that while the early adopters of IT (pre-2000) all saw declines in inflation rates following adoption, IT adopters since then have enjoyed such success in only about half the cases. Since there is not much difference, on average, between IT and non-IT countries in mean inflation, inflation volatility and the extent of inflation anchoring, it is not easy to sort out what role IT has played in ensuring good outcomes; in particular, we cannot rule out the possibility that the success of IT may be due to ‘regression to the mean’. Our country-level analysis—using the Synthetic Control Method (SCM) to compare outcomes in IT countries to a synthetic cohort—shows that IT adoption delivers significant inflation gains in about a third of the cases. At the same time, we also find limited support for the concern that adoption of IT systematically leads to poorer growth outcomes. At a time when central banks are struggling to keep inflation in check, our results suggest that the belief that IT adoption will be sufficient to achieve this goal cannot be taken for granted. ER -