A Simple, Model-Independent Analysis of Reasons for Non-Fulfillment of the Declared Inflation Target

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A Simple, Model-Independent Analysis of Reasons for Non-Fulfillment of the Declared Inflation Target

In: Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007

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Michal Skorepa

Abstract

In the period 1998-2007, inflation very often deviated from inflation targets of the Czech National Bank, most of these deviations being in the direction of undershooting the targeted level. In this paper, a purely statistical, model-independent procedure is used to search for an answer to the question of whether this clear asymmetry in inflation target fulfillment can be explained more by an asymmetry in outside shock or an asymmetry of the Czech National Bankâ€™s monetary policy. Our results indicate that the latter explanation is statistically more persuading. For the period since 2002, moreover, it looks like the decisions of the Czech National Bankâ€™s Bank Board more or less sticked to the recommendations implicit in materials supplied by the Bankâ€™s forecasting team; the bias in this second period, at least, can therefore be ascribed to the Bankâ€˜s forecasting apparatus rather than preferences of the Bank Board as revealed in its monetary policy decisions.

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This chapter was published in: Katerina Smidkova (ed.) Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007, , chapter 3, pages 35-46, 2008.

This item is provided by Czech National Bank, Research Department in its series Occasional Publications - Chapters in Edited Volumes with number 03.

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Related research
This chapter was published in the following book, which is listed on IDEAS:
Juraj Antal & Zuzana Antonicova & Jan Babecky & Michal Hlavacek & Tomas Holub & Roman Horvath & Jarek Hurnik & Ondra Kamenik & Karel Musil & Jiri Podpiera & Lubos Ruzicka & Michal Skorepa & Katerina S, 2008. "Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number 01 edited by Katerina Smidkova. [Downloadable!]
Keywords: inflation targeting; inflation persistence; autoregression models;

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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.:

Alex Cukierman & Anton Muscatelli, 2008. "Nonlinear Taylor Rules and Asymmetric Preferences in Central Banking: Evidence from the United Kingdom and the United States," The B.E. Journal of Macroeconomics, Berkeley Electronic Press, vol. 8(1). [Downloadable!]
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:
- Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
- Svensson, Lars E.O., 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Seminar Papers 615, Stockholm University, Institute for International Economic Studies. [Downloadable!]
- Lars E. O. Svensson, 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," NBER Working Papers 5797, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Lars E O Svensson, . "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Bank of England working papers 56, Bank of England.
- Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June. [Downloadable!] (restricted)

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