Payame Noor University Economic Growth and Development Research 2228-5954 10 39 2020 06 21 The Impact of Financial Development on Monetary Policy Efficiency and Inflation Targeting The Impact of Financial Development on Monetary Policy Efficiency and Inflation Targeting 15 28 6115 10.30473/egdr.2019.48373.5369 FA Mansour Khalili Iraqi Professor, Faculty of Economics, University of Tehran, Tehran, Iran Sajad Barkhordari Assistant Professor, Faculty of Economics, University of Tehran, Tehran, Iran Amin Gallavani Ph.D. Student, Faculty of Economics, University of Tehran, Tehran, Iran Journal Article 2019 08 28 This study attempts to find out the impact of financial development on inflation targeting and monetary policy efficiency in OECD and OPEC countries for the period 2001-2017 based on annual data. For this purpose, the long-term inflation trend, which was extracted by the Hodrick Prescott (HP) filter, is considered as a proxy for the target inflation rate, and the difference between this proxy and the actual inflation rate was entered to the model as a dependent variable. Also, the broad-based index, which had been introduced by the International Monetary Fund (IMF) in 2016, optimized by using fuzzy logic, has been used as a proxy for financial development. The results show that in OPEC countries, financial development has been neutral on monetary policy efficiency through output growth, which is consistent with the monetary neutral theory, and also financial development strengthen the efficiency of inflation targeting in these countries. On the other hand, the study indicates in OECD countries, financial development has been neutral on monetary policy efficiency through output growth, and unlike in OPEC countries, financial development has been neutral on inflation targeting efficiency in the period under review. This confirms that a high level of financial development reduces the efficiency of inflation targeting. <br />  This study attempts to find out the impact of financial development on inflation targeting and monetary policy efficiency in OECD and OPEC countries for the period 2001-2017 based on annual data. For this purpose, the long-term inflation trend, which was extracted by the Hodrick Prescott (HP) filter, is considered as a proxy for the target inflation rate, and the difference between this proxy and the actual inflation rate was entered to the model as a dependent variable. Also, the broad-based index, which had been introduced by the International Monetary Fund (IMF) in 2016, optimized by using fuzzy logic, has been used as a proxy for financial development. The results show that in OPEC countries, financial development has been neutral on monetary policy efficiency through output growth, which is consistent with the monetary neutral theory, and also financial development strengthen the efficiency of inflation targeting in these countries. On the other hand, the study indicates in OECD countries, financial development has been neutral on monetary policy efficiency through output growth, and unlike in OPEC countries, financial development has been neutral on inflation targeting efficiency in the period under review. This confirms that a high level of financial development reduces the efficiency of inflation targeting. <br />  https://egdr.journals.pnu.ac.ir/article_6115_ad9bf438ad4449fca6a453ed5c480d6d.pdf