Inflation Targeting As a Monetary Policy Rule: Experience and Prospects

This paper examines the inflation targeting experience in developing countries. Based on panel data of 53 developing countries, of which 20 those have adopted inflation targeting policy by the end of 2007, the purpose is to show the effects of inflation targeting on macroeconomic performance in these economies. We use the Great Moderation approach of Pétursson (2005) to analyze the relationship between inflation targeting and macroeconomic performance over the period 1980-2012. A key lesson from this experience is that this monetary policy realizes macroeconomic performance and contributes to the reduction of inflation, especially in developing countries with hyperinflation.