Inflation targeting and inflation convergence: International evidence

Abstract

We examine whether the inflation rates of the countries that pursue inflation targeting policies have converged as opposed to the experience of the OECD non-inflation targeters. Using a methodology introduced by Pesaran (2007a), we examine the stationarity properties of the inflation differentials. This approach has the advantage of avoiding setting arbitrarily a specific country as the benchmark economy. Our results indicate that the inflation rates converge irrespective of the monetary policy framework.