1. Inflation Targeting Twenty Years On: Where? Why?... by Klaus Schmidt-Hebbel Comments by: Stefan Gerlach University of Frankfurt

2. l Draws from the literature to address many questions: 1.When and where was IT adopted? 2.What led to the decision to adopt IT? 3.Inflation deviations from targets 4.Inflation levels 5.Efficiency of monetary policy 6.Transparency 7.Current challenges l Literature referred to shares many features: Large panels/many countries (98 countries of which 28 are ITers) 2

3. l This is a strength of the paper … “Neat idea – something that someone should do.” l … but also a weakness since it makes it difficult to attend to all details: Inflation measure in Norway? Adoption of IT in Switzerland? How should IT be defined? E.g. ECB & SNB use similar strategies. 3

4. l Decision to adopt IT: Fiscal position Financial/economic development Most important in cross-section Trade openness Regional dummy for Latin America Floating exchange rate Multinomial logit/probit. Inflation Endogenous variable. Gerlach (EER, 1999): CBI, commodities & supply shocks. 4

5. Distinction between early and late ITers? Role of IMF? How well does the model fit? Problems? Large countries? l Why/how does inflation targeting “work”? Paper establishes that countries with IT have lower inflation than reference group. Why? Paraphernalia Greater focus on inflation Unobservables 5

6. l Conclusions Interesting summary of the cross-sectional literature. Quite a bit more could probably be squeezed out of these papers/data. 6