Does inflation targeting really matter? Doubly robust estimation

ABSTRACT

This study examines the performance stability of firms in inflation-targeting countries before and after the 2008 global financial crisis. We use the propensity score method to analyse and compare firms in inflation-targeting and non-inflation-targeting countries. The estimation results show that firms in inflation-targeting countries underperform in response to shocks. Our results suggest that inflation targeting does not necessarily mitigate an economy’s response to business cycle fluctuations.

KEYWORDS:

• Inflation targeting
• monetary policy
• propensity score
• doubly robust estimation

JEL CLASSIFICATION:

• D22
• E52
• E58

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ See the International Monetary Fund’s World Economic Outlook 2007 for the advanced economies.

² We cannot estimate by excluding Finland because it generates a sample with a propensity score below ${10}^{-5}$.

Additional information

Funding

This work was supported by the Japan Society for the Promotion of Science KAKENHI [grant number 20K01638].