Does Institutional Change Really Matter? Inflation Targets, Central Bank Reform and Interest Rate Policy in the OECD Countries

50 Pages Posted: 4 Apr 2001

See all articles by Anton Muscatelli

Anton Muscatelli

University of Glasgow - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Patrizio Tirelli

Department of Economics and Management; Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Carmine Trecroci

University of Brescia

Multiple version iconThere are 2 versions of this paper

Date Written: April 2000

Abstract

We estimate forward-looking interest-rate reaction functions for the G3 economies and for a group of countries which recently adopted inflation targets. Some significant shifts in the conduct of monetary policy are detected in the G3 countries, especially in the USA and Japan. In contrast with popular wisdom, it is only since the 1990s that policies in these countries begin to look consistent with an inflation-targeting regime. In addition, the introduction of inflation targeting and central bank reforms in countries like Sweden, Canada and New Zealand has not led to major changes in the way in which central banks react to the objectives of economic policy. In all cases changes in policy behaviour pre-date the introduction of inflation targets and central bank reforms. The paper challenges the one-size-fits-all attitude towards modern central bank policymaking which permeates a great deal of the current literature.

Keywords: Monetary policy, inflation targets, central bank reform, reaction functions, interest rates

JEL Classification: E58, F41

Suggested Citation

Muscatelli, Vito Anton and Tirelli, Patrizio and Trecroci, Carmine, Does Institutional Change Really Matter? Inflation Targets, Central Bank Reform and Interest Rate Policy in the OECD Countries (April 2000). CESifo Working Paper Series No. 278, Available at SSRN: https://ssrn.com/abstract=263930 or http://dx.doi.org/10.2139/ssrn.263930

Vito Anton Muscatelli (Contact Author)

University of Glasgow - Department of Economics ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Patrizio Tirelli

Department of Economics and Management ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100
Italy

HOME PAGE: http://https://sites.google.com/site/patriziotirellihomepage/

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

Carmine Trecroci

University of Brescia ( email )

Via San Faustino 74B
Brescia, 25122
Italy

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