Inflation targets reflect macro fundamentals, impacting global economic stability.
The article explores how countries decide on their inflation targets. By looking at data from central banks and governments, the researchers found that inflation targets are influenced by economic factors. Countries with higher inflation tend to set higher targets. Also, countries with more economic instability tend to have wider ranges for their targets. Surprisingly, central banks with less credibility tend to aim for higher inflation targets. Additionally, countries with faster economic growth tend to have higher inflation targets.