Breadcrumbs Image

Working Paper Series

  • Home
  • dLibrary //
  • API Publications //
  • Working Paper Series
dLibrary // API Publications

Working Paper Series - A Nonparametric Approach To Evaluating Inflation-Targeting Regimes



API Publications

dLibrary

A Nonparametric Approach To Evaluating Inflation-Targeting Regimes


Volume : 0

No : 0

ISSN : WPS09014

Publisher : Arab Planning Institute - Kuwait

Author (s) : Weshah Razzak , RabieNasser 

Published Date : 1/1/2009


Contents :
We use a variety ofnonparametric test statistics to evaluate the inflation- targeting regimes of Australia, Canada, New Zealand, Sweden and the UK. We arguethat a sensible approach of evaluation must rely on a variety of methods, amongthem parametric and nonparametric econometric methods, for robustness andcompleteness. Our evaluation strategy is based on examining two possible policyimplications of inflation targeting: First, a welfare implication and second, areal variability implication. The welfare implication involves evaluating autility function, and tested by testing whether (1) the distributions of thelevels and the growth rates of private consumption and leisure per capitaremained unchanged under inflation targeting, i.e., first-order stochasticdominance; and (2) testing a linear combination of consumption and leisure percapita, where the parameter describing the utility of leisure or the relativepreference of leisure is calibrated. Then we introduce nonparametric univariateand multivariate statistical methods to test whether the first and secondmoments of a variety of real variables, such as the real exchange ratedepreciation rate, real GDP per capita growth rate in addition to privateconsumption per capita and leisure per capita growth rates, remained unchangedunder inflation targeting, decreased or increased significantly. There seems tobe some evidence of increased welfare under inflation-targeting regimes, but noconcrete evidence is found that inflation targeting policy, in general, reduces(or increases) real variability. Some cross country differences are also found

Download File (Free)