Has inflation targeting (IT) conferred benefits in terms of economic growth on countries that followed this particular monetary policy strategy during the crisis period 2007-12? This paper answers this question in the affirmative. Countries with an IT monetary regime with flexible exchange rates...

Under a floating exchange rate and integrated financial markets an optimizing central bank acting under discretion to achieve domestic objectives generates a positive co-movement between the domestic and the foreign interest rate in a small open economy. A high degree of positive co-movement...