Monetary Policy and Inflation Targeting: Lessons Learned from the Covid Crisis

The global COVID-19 crisis led to a major recession, following a supply and demand shock severely affecting both developed and emerging economies.Containment measures reduced demand and production, while financial market volatility impacted emerging economies.Countries' stimulus policies had mixed effects on these economies.The pandemic also disrupted global supply chains, leading to volatility in the prices of raw materials such as oil, metals and agricultural products.These fluctuations had an impact on production costs and, consequently, on the prices of final goods and services.In the wake of rising inflation, some are questioning the effectiveness of inflation-targeting policies.Our study evaluates the performance of this monetary regime in the face of crisis, estimating the efficiency frontier: inflation variability -output variability, which allows us to deduce measures of economic performance and measures of the efficiency of monetary policy in the face of an economic crisis.