Inflation Targeting and Inflation Persistence

George J. Bratsiotis, Jakob Madsen, Christopher Martin

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

This paper argues that the adoption of an inflation target reduces the persistence of inflation. We develop the theoretical literature on inflation persistence by introducing a Taylor Rule for monetary policy into a model of persistence and showing that inflation targets reduce inflation persistence. We investigate changes in the time series properties of inflation in seven countries that introduced inflation targets in the late 1980s or early 1990s. We find that the persistence of inflation is greatly reduced or eliminated following the introduction of inflation targets.

Original languageEnglish
Pages (from-to)3-17
Number of pages15
JournalEconomic and Political Studies
Volume3
Issue number1
DOIs
Publication statusPublished - 1 Jan 2015

Keywords

  • Inflation persistence
  • Inflation targeting
  • Phillips Curve
  • Taylor Rule

ASJC Scopus subject areas

  • Economics and Econometrics
  • Sociology and Political Science
  • Political Science and International Relations

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