Just as inflationtargeting countries could show elements of improved inflation performance, nontargeting countries could as well. The second approach to studying the effect of targeting, cross-section analysis, compares inflation performance for targeting and nontargeting countries.
Once residents have accumulated large amounts of foreign assets, they could use these assets to counterbalance short-term currency volatility if they perceive this to be an opportunity to profit from a temporary undervaluation of the exchange rate.