Does Inflation Targeting Matter for Economic Growth During Global Financial Crises? Evidence from Emerging Economies

This paper examines the effects of inflation targeting (IT) on output income per capita growth in emerging economies over the period 1990 - 2014, which includes key globalization years and accounts for two of the biggest global financial and economic crises in recent history: the Asian Financial Crisis (1997-99) and the Global Financial Crisis (2007-08). I break down my sample into five geographical regions (the World, Asia, Latin America, Europe and Emerging Market Economies) to account for the regional effects of IT on growth as indicated in previous literature. I employ Fixed-Effects and Random-Effects Models that control for traditional growth determinants, globalization and periods of global financial and economic crises. I find that inflation targeting during periods of global crises on the World level, especially in Asia, result in higher output income per capita for emerging economies. Inflation targeting in general is found to be detrimental to economic growth for all regions considered. I argue that policy makers advocate for the adoption of inflation targeting regimes in developing Asian economies in order to increasing their resilience with regard to economic growth when faced with global economic and financial crises