The Effect of Inflation Targeting Strategies on Steady-State Economic Growth in Selected Countries

The inflation targeting strategy, through decreasing uncertainty, enables countries to raise the steady-state economic growth rate in the expense of short-term costs. This study aims to investigate the effect of this strategy on steady-state economic growth, using economic policy assessment models and in particular, the DID model to observe the effects of inflation targeting in targeting and non-targeting countries from 1980 to 2016. The treatment group includes three developed industrial countries and the control group includes three Muslim countries with a high level of human development. The results indicate that the average treatment effect of inflation targeting on the treated (ATT) is positive and statistically significant. Moreover, these results show that the longer this strategy is to run, the more steady-state economic growth.