The ex post analysis of inflation target fulfilment plays an important role in an inflation targeting framework. The major benefits of ex post analysis are threefold. First, it might improve the forecast accuracy. Second, it helps central bank staff and board members to understand the capabilities and limitations of the forecasts used in their decision-making. Third, it enhances monetary policy transparency and credibility. The primary aim of this paper is to propose a methodological framework for inflation target fulfilment assessment based on partial simulations, as applied in the Czech National Bank. In order to demonstrate the applicability of this framework we analyse the performance of the Czech National Bank between 2002 and 2006. We show that a large part of the inflation target misses in this period can be assigned to bias in the variables describing external developments.
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Paper provided by Czech National Bank, Research Department in its series Working Papers with number
2007/11.
Find related papers by JEL classification: E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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