Title: Is price stability enough? Macroeconomic performance of inflation targeting in developing countries

Authors: Metin Ozdemir, Selim Tuzunturk

Addresses: Uludag University, Department of Economics, Bursa 16059, Turkey. ' Uludag University, Department of Econometrics, Bursa 16059, Turkey

Abstract: Since the beginning of the 1990s, both industrialised and developing countries have adopted inflation targeting as a monetary policy strategy. Their central banks have designed their legal mandates to instutionalise monetary policy to aim only at price stability. In this sense, price stability is accepted as a pre-condition of sustainable growth and employment. In this study, we investigated the relationship between inflation and growth for 13 developing countries, which had already adopted inflation targeting over the period 2001–2005. Panel estimations consistently suggest that higher macroeconomic performance in terms of sustainable growth cannot be accomplished through inflation targeting alone.

Keywords: developing countries; inflation targeting; monetary policy; panel data; price stability; sustainable economy; sustainable growth; macroeconomic performance.

DOI: 10.1504/IJSE.2009.024762

International Journal of Sustainable Economy, 2009 Vol.1 No.4, pp.352 - 372

Published online: 30 Apr 2009 *

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