Inflation targeting and economic performance: an empirical analysis

Global financial disturbances challenge countries’ ability to maintain stable economic performance, raising questions about the effectiveness of monetary policy frameworks. This study evaluates how inflation-targeting (IT) countries respond to external spillovers compared to non-IT economies. Using entropy balancing combined with a differences-in-differences strategy for 1980–2019, we address self-selection and estimate causal effects on real per capita income, debt-to-GDP, and employment. The results indicate that IT adoption may involve higher employment costs under shifting global conditions, while effects on output and public debt vary across income groups. Overall, the findings suggest that IT economies display heightened vulnerability to external spillovers.