Inflation Targeting and Central Banks: Institutional Set-ups and Monetary Policy Effectiveness

Inflation targeting (IT) has become the most popular monetary policy framework among larger economies, but its institutional set-ups can vary significantly. This book investigates the importance of institutional arrangements for policy outcomes and finds that the quality of these arrangements materially affects monetary policy effectiveness. It includes supplementary indices of proposed institutional arrangements that assess various aspects related to IT central banks independence, accountability, and transparency. The book is relevant for scholars and researchers of monetary economics and monetary policy and will be essential reading for central banks already pursuing an IT strategy or those preparing to adopt one.

Format: Hardback
Length: 364 pages
Publication date: 29 July 2021
Publisher: Taylor & Francis Ltd

Over the past three decades, inflation targeting (IT) has emerged as the dominant monetary policy framework among larger economies. However, the diverse characteristics of IT have led to various interpretations and differing institutional set-ups among central banks. Against this backdrop, this book delves into the significance of institutional arrangements in shaping policy outcomes. Specifically, it seeks to answer the question of whether there exist significant differences in the institutional set-ups of IT central banks and, if so, whether these differences influence the ability of monetary authorities to achieve their policy goals.

The book conducts a comprehensive examination of approximately 70 aspects related to independence, accountability, and transparency of 42 IT central banks across the past 30 years. Through rigorous analysis, it emerges that the quality of institutional set-ups plays a pivotal role in determining the effectiveness of monetary policy. In fact, a visible improvement in institutional arrangements resulting from implementing an inflation targeting strategy can be regarded as a lasting contribution to central banking. Despite recent critiques of the framework, its prospects remain favorable.

For advocates of IT, the findings of this book provide insights into the sources of IT's strengths, while IT opponents may view them as identifying elements of IT institutional set-ups that should be retained even if the need arises to replace IT with another regime. Given the critical role of monetary policy in the economy, such knowledge holds significant implications. Therefore, this book appeals to a wide range of audiences, including scholars and researchers in monetary economics and monetary policy, and is considered essential reading for those interested in understanding the intricacies of inflation targeting and its impact on central banking.

Weight: 718g
Dimension: 162 x 241 x 29 (mm)
ISBN-13: 9781032038278