Working paper: The impact of inflation targeting: Testing the good luck hypothesis

Working paper - March 2020 - No. 152

Authors Ravenna, Federico (Danmarks Nationalbank); Ingholt, Marcus Mølbak (Norges Bank)
Subject International Economy; Inflation, wages and prices; Monetary policy; Models
Type Working paper
Year 2020
Published 6 March 2020
Was the fall in the level and volatility of inflation over the last 30 years the result of good luck, or good monetary policy? We assess the inflation experience of Canada, an early adopter of an inflation targeting policy. Good luck explains only a minor portion of the changes in inflation after the shift in policy. Most of inflation and output stabilization is explained by the impact on expectations.