Inflation Targeting Does Not Matter: Another Look at OECD Sacrifice Ratios


  • I thank Eurilton Araújo, Cyntia Azevedo, Alexandre Carvalho, Vitorio Corbo, and Lucio Sarno for helpful discussions. All errors are only my responsibility. Financial support from the CNPq/Brazil under grant no. 200403/2007-9 is gratefully acknowledged.


Recently in this journal, Gonçalves and Carvalho (2009) concluded that inflation targeters were able to bring inflation down at less cost than nontargeters (p. 242). This comment shows that their conclusion is not robust but instead is the result of comparing a particular subset of inflation targeting (IT) disinflations with nonsimultaneous disinflations that occurred under very different macroeconomic conditions. In their sample, simple extensions such as justifiably varying the treatment group of IT disinflations, to control for common time-varying effects or to control for the Maastricht Treaty effects, suggest that IT does not matter.