Inflation Targeting in Western Europe

Resumen

Several European countries adopted inflation targeting as a monetary policy strategy during the 1990s. This article evaluates the impact of the establishment of this policy framework on the dynamics of inflation for three countries: United Kingdom, Spain and Finland. While smaller shocks triggered most of the decline in their high frequency inflation volatility, this is not always the case for their low frequency (trend) counterpart. We find that, in the case of the United Kingdom, the more aggressive monetary policy stance against inflation during the inflation targeting period was the most important factor behind the decline in trend inflation volatility.