Inflation targeting boosts economic stability and lowers private-sector expectations.
The article examines whether countries that adopt inflation targeting experience lower inflation rates and changes in economic variables. The researchers compared the performance of countries like New Zealand, Canada, the UK, and Sweden with countries that did not adopt targets, like Italy and Australia. They found that inflation targeting led to lower inflation expectations and influenced short-term interest rates, but did not significantly change sacrifice ratios or Phillips curves in target countries.