Inflation targeting or fear of floating in disguise? A broader perspective

Calvo and Reinhart [Calvo, G., Reinhart, C., 2002. Fear of floating. Quarterly Journal of Economics 117, 379-408] argue that many countries claim to float but actually display a “fear of floating” (FF) and that credible inflation targeting (IT) and FF are identical regimes. We analyze exchange rates, reserves, interest rates and inflation across 88 exchange rate regimes for 20 countries. We find IT is empirically distinguishable from fixed, floating, managed floating, and FF regimes. Credible IT appears to be more similar to floating and managed floating than to fixing or FF. Being able to identify these regimes accurately allows one to distinguish between cases where countries claim to IT but actually FF.