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Inflation Targeting: What Can the ECB Learn from the Recent Experience of the Bank of England?

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  • Artis, Michael J
  • Mizen, Paul
  • Kontolemis, Zenon

Abstract

Establishment of the European Central Bank presents a rare opportunity to define the operations of a central bank without a prior track record. This paper asks what might be learnt from the recent experience of inflation targeting at the Bank of England before the ECB specifies an, as yet undefined, operational target. The authors consider whether there should be single or multiple targets and which inflation measure should be used, if at all. If inflation is targeted then a forecast of its value becomes the intermediate variable. This raises an issue of transparency and the compensating supply of information necessary to fill the gap, but too much 'openness' can also be problematic. The ECB must be accountable and the contracting approach may be useful although being seen to 'say' and 'do' the same thing is ultimately most important.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 108 (1998)
Issue (Month): 451 (November)
Pages: 1810-25

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Handle: RePEc:ecj:econjl:v:108:y:1998:i:451:p:1810-25

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References

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  1. Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins II, 1997. "Efficient inflation estimation," Working Paper 9707, Federal Reserve Bank of Cleveland.
  2. Michael F. Bryan & Stephen G. Cecchetti, 1993. "The consumer price index as a measure of inflation," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 15-24.
  3. Artis, M.J. & Kontolemis, Z.G., 1998. "Inflation Targeting and the European Central Bank," Economics Working Papers eco98/4, European University Institute.
  4. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  5. Christina D. Romer & David H. Romer, 1996. "Federal Reserve Private Information and the Behavior of Interest Rates," NBER Working Papers 5692, National Bureau of Economic Research, Inc.
  6. Goodhart, Charles A E, 1994. "What Should Central Banks Do? What Should Be Their Macroeconomic Objectives and Operations?," Economic Journal, Royal Economic Society, vol. 104(427), pages 1424-36, November.
  7. repec:sae:niesru:v:164:y::i:1:p:65-79 is not listed on IDEAS
  8. International Monetary Fund, 1998. "The United Kingdom's Experience with Inflation Targeting," IMF Working Papers 98/87, International Monetary Fund.
  9. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  10. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
  11. Artis, Michael J & Kontolemis, Zenon G, 1998. "The European Central Bank and Inflation Targeting," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(1), pages 27-38, January.
  12. Michael Woodford, 1994. "Nonstandard Indicators for Monetary Policy: Can Their Usefulness Be Judged from Forecasting Regressions?," NBER Chapters, in: Monetary Policy, pages 95-115 National Bureau of Economic Research, Inc.
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Cited by:
  1. Hossein Samiei & Jan Kees Martijn, 1999. "Central Bank Independence and the Conduct of Monetary Policy in the United Kingdom," IMF Working Papers 99/170, International Monetary Fund.
  2. Kirsten Lommatzsch & Silke Tober, 2004. "The Inflation Target of the ECB: Does the Balassa-Samuelson Effect Matter?," EUI-RSCAS Working Papers 19, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  3. Andrade, E., 2002. "Bacen e BCs Selecionados: Uma Analise Comparativa do Nivel de Transparencia," Insper Working Papers wpe_13, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  4. Kamal, Mona, 2010. "تجربة الاتحاد النقدي الأوروبي في مجال التنسيق بين السياستين المالية والنقدية
    [The Experience of the European Monetary Union in the
    ," MPRA Paper 27764, University Library of Munich, Germany.
  5. Andrade, E., 2002. "Bacen e BoE: Uma Analise Comparativa do Nivel de Transparencia," Insper Working Papers wpe_12, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  6. Zenon Kontolemis G., 2002. "Money Demand in the Euro Area," IMF Working Papers 02/185, International Monetary Fund.
  7. Shu-ki Tsang, 2002. "Inflation Targeting in China?," Working Papers 192002, Hong Kong Institute for Monetary Research.

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