TY - JOUR
T1 - Effect of Inflation Targeting on Inflation Uncertainty
T2 - A SWARCH Analysis
AU - Tas, Bedri Kamil Onur
AU - Ertugrul, Hasan Murat
PY - 2013/12
Y1 - 2013/12
N2 - We analyse the success of inflation targeting (IT) in decreasing inflation volatility by investigating inflation variance before and after IT. We contribute to the literature by implementing Markov-Switching AutoRegressive Conditional Heteroscedastic methodology to model inflation volatility. After determining the unbiased conditional variances of inflation in each inflation-targeting country, we investigate structural breaks in inflation variability by both analysing individual countries and conducting a panel data analysis. All of these methods conclude that IT helps most of the countries to achieve lower inflation uncertainty (volatility). We also examine the country-specific factors that determine the effectiveness of inflation-targeting adoption.
AB - We analyse the success of inflation targeting (IT) in decreasing inflation volatility by investigating inflation variance before and after IT. We contribute to the literature by implementing Markov-Switching AutoRegressive Conditional Heteroscedastic methodology to model inflation volatility. After determining the unbiased conditional variances of inflation in each inflation-targeting country, we investigate structural breaks in inflation variability by both analysing individual countries and conducting a panel data analysis. All of these methods conclude that IT helps most of the countries to achieve lower inflation uncertainty (volatility). We also examine the country-specific factors that determine the effectiveness of inflation-targeting adoption.
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U2 - 10.1111/1467-8462.12036
DO - 10.1111/1467-8462.12036
M3 - Article
AN - SCOPUS:84888420637
SN - 0004-9018
VL - 46
SP - 444
EP - 459
JO - Australian Economic Review
JF - Australian Economic Review
IS - 4
ER -