Analysis Of The Stability Of Inflation In Inflation Targeting Countries Via Control Charts

Abstract

While inflation targeting (IT) has been adopted by a few countries as a monetary policy tool chiefly for inflation fighting purposes, the debate relative to its effect on making a difference on actual inflation level of the adopting country has been waging with no end in sight. A number of authors have attempted to address the issue with usually qualitative means. In this paper, we analyze the stability of inflation levels before and after the adoption of IT with the help of ‘control charts.' Control charts tell us when and in what fashion processes deviate from stability, allowing us to take timely and appropriate action to keep the process on course. Our findings show that the instability in inflation levels has been reduced in the post adopted era.

Keywords

• Inflation Targeting, Control Charts, Inflation