Why do EU countries use inflation targeting?
by Yutaka Kurihara
Global Business and Economics Review (GBER), Vol. 7, No. 1, 2005

Abstract: Because the European Central Bank's current goal is to achieve stable prices, some EU countries have adopted direct inflation control as a target of financial policy. Several other countries, however, have adopted other targets, such as money supply targeting, exchange rate targeting, and other targeting. Among these tools, inflation targeting has been used recently in many countries, and the number of countries using inflation targeting has been increasing. This paper shows that the openness of the economy, the central bank's independence from government, and fiscal surplus are negatively correlated with the adoption of inflation targeting. Past inflation is not adequate motivation for introducing inflation targeting in the EU.

Online publication date: Mon, 25-Apr-2005

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