Targeting Inflation Targeting: The Influence of Interest Groups

We examine whether sectional interest groups influence monetary policy goals in a manner consistent with their interests as distributive coalitions. In particular, we explore whether bank groups and labor groups are associated with the incidence of inflation targeting by the central bank. Controlling for a variety of economic and institutional factors, our main findings reveal that bank groups are associated with a higher probability that a country is an inflation targeter while labor groups are associated with a lower probability. The findings are conditional on the level of democracy and on aspects of central bank independence.