Does inflation targeting work in emerging East-Asian economies?
In: Panoeconomicus: naučno-stručni časopis Saveza Ekonomista Vojvodine ; scientific-professional journal of Economists' Association of Vojvodina, Band 59, Heft 5, S. 599-608
ISSN: 2217-2386
This paper evaluates on the performance of the inflation-targeting regime in
three emerging East-Asian economies that have experienced changes in
monetary policy regimes, from rigidities to a flexible exchange rate and
inflation targeting, after the financial crisis of 1997-98. In particular,
the evaluation focuses on the inter-relationship between inflation and the
output growth/gap in these emerging economies between the pre- and
post-inflation targeting periods. A bivariate GARCH (1,1) model is applied.
The results reveal lower variability in inflation and output growth after
the implementation of the inflation targeting regime. The persistency of
inflation and output also decline. The study finds no evidence of greater
disinflation cost experienced in these economies after the implementation of
the inflation-targeting regime. Overall, the results imply that inflation
targeting works well in these emerging markets.