Inflation targeting central banks face challenges with transparency and economic models.
The study looked at how well central banks have done in controlling inflation under the inflation targeting regime. They found that factors like exchange rates, government deficits, and financial sector development can affect how well central banks meet their inflation targets. Having a higher inflation target and wider control range can lead to more variable inflation outcomes. Surprisingly, being more transparent doesn't always help central banks perform better. However, using economic models can help central banks stabilize inflation and output better.