World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
Inflation Targeting in Developing Countries
Anthony Gathogo & Wook Sohn
World Economics, June 2015

This paper analyzes economic and institutional factors that affect the likelihood of adopting an inflation-targeting monetary policy regime in emerging markets and developing countries. We use a logit model for a sample that comprises both inflation-targeting and non-targeting countries for the period of 1990–2009. The results show that countries experiencing improved macroeconomic performance and stronger institutional stability have a high chance of switching to the inflation-targeting framework. In particular, central bank independence, as measured by governor turnover rate and legal independence, positively affects the decision to change regimes.


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