(3). Volatility is measured as t year nominal exchange rate minus t − 1 year
nominal exchange rate, divided by t − 1 nominal exchange rate (McKenzie, 1999).
Vit ITit it it =α +β + ΣdZ +ε (3)
where Vit is the volatility of the exchange rate for country i over period t, ITit is a dummy
variable with 1 if i is an inflation targeter over period t and zero otherwise; thus, ITit is a
treatment variable, which measures the average effect of IT across countries