Inflation Targeting around the World

This paper examines the inflation record of 29 inflation and non inflation targeting economies. Both industrial and emerging market economies are considered. Empirical evidence is based on a comparison of actual and forecasted inflation, an econometric analysis that estimates changes in inflation persistence, as well as an estimate of the probability of a breach in the inflation target as a proxy for the fragility of the targeting regime. I find that inflation persistence has fallen in only a handful of emerging market economies. However, the inflation targeting regime is not especially fragile in emerging market economies. As these economies gain experience with inflation targets and respond appropriately to forecast errors generated by the private sector the likelihood of breaches in the target ranges tends to fall