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How Inflation Targeters (Can) Deal with Uncertainty

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Author Info
Kateřina Šmídková () (Czech National Bank, Prague)

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Abstract

The paper argues that a well-designed methodology for dealing with uncertainty improves the quality of interest-rate decisions taken by inflation targeters. A well-planned methodology is also more easily communicated to the general public, and the subsequent greater transparency makes inflation targeting more efficient. Therefore, it is relevant for an inflation targeter to consult with or consider information from other inflation targeters, researchers, and relevant decision makers when designing or improving upon their methodology. The paper also summarizes the results of a recent survey on methods for dealing with uncertainty for inflation targeters. The results are presented in a framework designed in line with decision analysis. The paper summarizes which methods are commonly used by inflation targeters and what lessons can be learnt from economic research and from decision makers.

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Publisher Info
Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 55 (2005)
Issue (Month): 7-8 (July)
Pages: 316-332
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Handle: RePEc:fau:fauart:v:55:y:2005:i:7-8:p:316-332

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Related research
Keywords: inflation targeting; uncertainty; decision analysis; robustness analysis;

Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Katerina Smidkova, 2003. "Targeting inflation under uncertainty: Policy makers' perspective," Research and Policy Notes 2003/02, Czech National Bank, Research Department. [Downloadable!]
    Other versions:
  2. Katerina Smidkova, 2003. "Methods Available to Monetary Policy Makers to Deal with Uncertainty," Macroeconomics 0310002, EconWPA. [Downloadable!]
  3. Katerina Smidkova, 2003. "Koruna Exchange Rate Turbulence in May 1997," Macroeconomics 0303020, EconWPA. [Downloadable!]
  4. Andrew G. Haldane & Nicoletta Batini, 1998. "Forward-Looking Rules for Monetary Policy," NBER Working Papers 6543, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Cogley, Timothy & Morozov, Sergei & Sargent, Thomas J., 2005. "Bayesian fan charts for U.K. inflation: Forecasting and sources of uncertainty in an evolving monetary system," Journal of Economic Dynamics and Control, Elsevier, vol. 29(11), pages 1893-1925, November. [Downloadable!] (restricted)
    Other versions:
  6. Christopher A. Sims, 2002. "The Role of Models and Probabilities in the Monetary Policy Process," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2002-2), pages 1-62. [Downloadable!]
  7. Robert J. Tetlow & Peter von zur Muehlen, 2000. "Robust monetary policy with misspecified models: does model uncertainty always call for attenuated policy?," Finance and Economics Discussion Series 2000-28, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  8. Svensson, Lars E O, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," CEPR Discussion Papers 1511, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Katerina Smidkova, 2008. "Evaluation of the Fulfilment of the CNB's Inflation Targets," Occasional Publications - Chapters in Edited Volumes, in: Katerina Smidkova (ed.), Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007, chapter 1, pages 10-17 Czech National Bank, Research Department. [Downloadable!]
  2. Ian Babetskii & Ales Bulir & Fabrizio Coricelli & Jan Filacek & Michal Franta & Roman Horvath & Branislav Saxa & Katerina Smidkova, 2008. "CNB Economic Research Bulletin: Ten years of inflation targeting," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 6, number rb06/1 edited by Ian Babetskii & Katerina Smidkova. [Downloadable!]
  3. Alena Bicakova & Kamil Dybczak & Ales Krejdl & Jiri Slacalek & Michal Slavik, 2007. "CNB Economic Research Bulletin: Fiscal policy and its sustainability," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 5, number rb05/2 edited by Ian Babetskii & Vladimir Bezdek. [Downloadable!]
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