On the Success of Inflation Targeting

New Zealand was the first major country to introduce inflation targeting as a monetary policy regime back in 1990, but given its relative youth it's proven to be surprisingly successful, write Ilian Mihov, an economist based in Singapore, and Andrew Rose of the University of California.

"Inflation targeting seems like it would be a monetary regime that would compare poorly using the filter of time. After all, IT is a relatively new monetary regime. Nevertheless, we have found that IT seems already to have withstood the test of time; the duration of IT regimes is already as long as or significantly longer than alternatives like fixed exchange rates. No country has yet been forced to abandon a regime of inflation targeting in crisis, something that cannot be said of all other monetary frameworks. And this duration matters, since more durable monetary regime are systematically associated with better inflationary outcomes."

Check here for Rose's previous appearance on Odd Numbers.