Inflation Targeting and Output Growth: Empirical Evidence for the European Union

28 Pages Posted: 3 Mar 2006

See all articles by Nicholas Apergis

Nicholas Apergis

University of Macedonia

Alexandros Panethimitakis

affiliation not provided to SSRN

Athanasios Vamvakidis

International Monetary Fund (IMF) - European Department

Date Written: May 2005

Abstract

This paper evaluates the performance of two alternative policy rules, a forward-looking rule and a spontaneous adjustment rule, under alternative inflation targets, in terms of output losses in a macroeconomic model, using European Union data. The simulations suggest that forward-looking rules contribute to macroeconomic stability and monetary policy credibility, and that a positive inflation target, as opposed to zero inflation, leads to higher and less volatile output. These results are robust to changes in the specification of the model and time period. The same methodology applied to individual countries supports country-specific flexible inflation targeting.

Keywords: Inflation targeting, European Union

JEL Classification: E31, E32, E37, E52

Suggested Citation

Apergis, Nicholas and Panethimitakis, Alexandros and Vamvakidis, Athanasios, Inflation Targeting and Output Growth: Empirical Evidence for the European Union (May 2005). Available at SSRN: https://ssrn.com/abstract=888135 or http://dx.doi.org/10.2139/ssrn.888135

Nicholas Apergis (Contact Author)

University of Macedonia ( email )

156 Egnatia St.
P.O. 1591
Thessaloniki, 54006
Greece

Alexandros Panethimitakis

affiliation not provided to SSRN

No Address Available

Athanasios Vamvakidis

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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