Flexible Inflation Targeting and Macroeconomic Performance: Evidence from ASEAN

The experience of flexible inflation targeting in ASEAN-5 has been favorable. This paper shows improvements in macroeconomic outcomes consistent with the framework’s mandated objectives: lower levels and volatility of inflation, more stable economic growth and a well-functioned financial system. ASEAN-5 economies can cope well with a se- quence of past shocks and crises, although the marginal contribution of the inflation targeting framework itself is still not clear-cut. Over the past 20 years, policy frameworks of ASEAN-5, similar to other emerging market economies, have continuously evolved to incorporate various policy tools, which include foreign exchange intervention, macropru- dential policy and capital flow measures. This reflects challenges emanated from capital flow volatility and domestic financial imbalances. A multitude of policy tools are ar- guably one of the key factors contributing to the sound macroeconomic outcome during the post-targeting periods.