A new test for the success of inflation targeting

@inproceedings{Tella2003ANT,
  title={A new test for the success of inflation targeting},
  author={Torcuato Di Tella and Ver{\'o}nica Cohen and Mart{\'i}n Gonzalez Rozada and Andrew Powell},
  year={2003}
}
We propose a new test, derived from a set of variance decompositions of a structural VAR, for the success of inflation targeting. In contrast to standard sacrifice ratios this test considers changes in the structure of real and nominal shocks; second moment effects. We find strong support for IT with 7 of the 9 countries in our sample having negative “sacrifices” and many countries with “benefits”. However, we also find very different performances across IT countries. We find that “IT success… CONTINUE READING

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