Inflation targeting (IT) has been popular in emerging economies despite
its early adoption in advanced countries. This paper seeks to find out whether the
presence of the IT regime for the Asian countries enhance credibility of the central
banks. The study makes use of two episode methods in the calculation of sacrifice
ratio for the period 1970–2014 for 13 Asian economies. Empirical findings based on
annual data suggest that an IT regime indeed enhances credibility of the central
banks. The low sacrifice ratio in IT countries is explained by the implementation of
IT regime. The IT policy has potential to reduce sacrifice ratios by 3.7–5.7 points.
Among other determinants initial inflation is found to be significant in Asian
economies. However, the speed of disinflation remains insignificant irrespective of
the method used in the analysis. These findings do not support the idea that IT and
speed can be used alternatively as credible monetary policy

• Credibility of inflation targeting: some recent Asian evidence