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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
Inflation targeting and the anchoring of inflation expectations: cross-country evidence from consensus forecasts
J. Scott Davis
Ignacio Presno
Abstract

Using survey data of inflation expectations across a 36 developed and developing countries, this paper examines whether the adoption of inflation targeting has helped to anchor inflation expectations. We examine the response of inflation expectations following a shock to inflation, inflation expectations, and oil prices. For the 13 countries that adopted inflation targeting midway through the time period used in this study, there is a significant difference in the responses between the earlier and the later subperiods. A shock leads to a positive, significant, and persistent increase inflation expectations in the earlier, pre-targeting subperiod, but the same response is much less significant and persistent in the later, posttargeting subperiod. For the control group of 23 countries that did not adopt inflation targeting during this time period, there is no difference between responses in the earlier and the later sub-periods.


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J. Scott Davis & Ignacio Presno, Inflation targeting and the anchoring of inflation expectations: cross-country evidence from consensus forecasts, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 174, 13 May 2014.
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Keywords: price levels; inflation; deflation; monetary policy
DOI: 10.24149/gwp174
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