Inflation targeting fails to shield developing economies from global monetary shocks.
The study looked at how countries with inflation targeting handle global changes in interest rates. They found that even though these countries have tried to reduce their reliance on foreign currencies, they are still affected by world monetary shocks. Inflation targeting countries react more strongly to these shocks compared to countries with fixed or managed exchange rates. This suggests that adopting inflation targeting alone does not guarantee better economic performance or independence in monetary policy.