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Inflation targeting in low‐income countries: Does IT work?
Author(s) -
Morozumi Atsuyoshi,
Bleaney Michael,
Mumuni Zakari
Publication year - 2020
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12690
Subject(s) - economics , limiting , developing country , inflation (cosmology) , inflation targeting , work (physics) , independence (probability theory) , monetary economics , central bank , government (linguistics) , monetary policy , economic growth , mechanical engineering , linguistics , statistics , physics , philosophy , mathematics , theoretical physics , engineering
Previous research on inflation targeting (IT) has focused on high‐income countries and emerging market economies (EMEs). Only recently have sufficient data accumulated for the performance of IT in low‐income countries (LICs) to be assessed. We show that IT has not so far been as effective in reducing inflation in LICs as in EMEs. Relatively low central banks’ instrument independence in LICs, associated with weak restrictions limiting a central bank’s lending to the government, helps explain this result.