Is Inflation Targeting Effective?——New Evidence from the Synthetic Control Methods
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| Title | Is Inflation Targeting Effective?——New Evidence from the Synthetic Control Methods
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| Author | Su Zhi and Hu Di |
| Organization | School of Statistics and Mathematics, Central University of Finance and Economics |
| Email | suzhi1218@163.com；hudi0317@163.com |
| Key Words | Inflation Targeting; Synthetic Control; Monetary Policy; Economic stability |
| Abstract | Inflation Targeting is a monetary policy pursuing long-term price stability, and more than 20 countries have adopted this monetary policy. This paper applies a novel non-experimental evaluation approach to examine the question of whether inflation targeting is an effective policy tool in emerging economies. We found that the synthetic control method can overcome the endogenous policy and the bias problem of sample selection, and evaluate the effectiveness of inflation targeting in different countries quantitatively; the inflation targeting can effectively reduce the rate of inflation, keeping the price long-term stable and economic development steady, and even with the exogenous shock, the countries applied inflation targeting got smaller increase of inflation rate. Although at present China does not possess the preconditions for implementing of the inflation targeting, the successful experience of some emerging countries can offer references for our country monetary policy. |
| Serial Number | WP844 |
| Time | 2015-03-24 |
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