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July/August 2002, 
Vol. 84, No. 4
Posted 2002-07-01

Does Inflation Targeting Matter?

by Jürgen von Hagen and Manfred J.M. Neumann

This article examines the changes of short-term interest rates and of consumer price inflation and output gaps at different frequencies and shows that inflation targeting has reduced short-term variability in central bank interest rates and in headline inflation. The authors interpret this as evidence that inflation targeting has induced central banks to pay less attention to short-run news and noise and adopt a steadier course of monetary policy.