Inflation targeting leads to stable inflation and accommodates real shocks.
The article explores different ways countries use inflation targeting by analyzing how central banks behave after adopting it. The researchers looked at three countries in the early 1990s and found that inflation targeting doesn't mean only focusing on inflation. In the UK and Canada, lower inflation levels were combined with better handling of real shocks and more stable inflation expectations. In New Zealand, inflation levels decreased but expectations became less stable. Overall, countries adopting inflation targeting didn't just focus on inflation but also considered other factors like real shocks and stable expectations.