In this paper, we examine the performance of inflation targeting of four Asian inflation targeters. In order to investigate the impact of inflation targeting framework, we construct the sacrifice ratio as a measurement for the cost of disinflation. We have the following findings. First, the unit cost of disinflation is lower for higher initial inflation level. Second, the unit cost of disinflation is higher if the length of the disinflation episode is longer. Third, the unit cost of disinflation with low magnitude is smaller. Lastly, inflation targeting framework does not change the previous three conclusions in the four Asian countries in our sample.
|Keywords:||Inflation Targeting, Disinflation, Trend Output, Sacrifice Ratio|
The Open University of Hong Kong, Hong Kong
Worcester State College, USA
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