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On Target? The International Experience with Achieving Inflation Targets

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Author Info
Scott Roger
Mark R. Stone

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Abstract

This paper examines the international experience with full-fledged inflation targeting monetary regimes. Stylized facts are brought together from a review of the institutional elements of inflation targeting frameworks, a comparison of actual and targeted inflation outcomes, and case studies of large inflation target misses. Inflation targets are missed about 40 percent of the time and often by substantial amounts and for prolonged periods, yet no country has dropped inflation targeting. The resilience of the inflation targeting regime is attributable to the flexibility of the framework, its high standards of transparency and accountability, and the lack of realistic alternatives.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/163.

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Length: 68 pages
Date of creation: 25 Aug 2005
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Handle: RePEc:imf:imfwpa:05/163

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Keywords: Inflation targeting ; Monetary policy ;

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This paper has been announced in the following NEP Reports: 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. Svensson, Lars E. O., 2000. "Open-economy inflation targeting," Journal of International Economics, Elsevier, vol. 50(1), pages 155-183, February. [Downloadable!] (restricted)
    Other versions:
  2. Arminio Fraga & Ilan Goldfajn & Andre Minella, 2003. "Inflation Targeting in Emerging Market Economies," NBER Working Papers 10019, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Alina Carare & Mark R. Stone, 2003. "Inflation Targeting Regimes," IMF Working Papers 03/9, International Monetary Fund. [Downloadable!]
    Other versions:
  4. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Paul R. Masson, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  6. Andrea Schaechter & Marc Zelmer, 2000. "Adopting Inflation Targeting: Practical Issues for Emerging Market Countries," IMF Occasional Papers 202, International Monetary Fund.
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  8. Mark R. Stone, 2003. "Inflation Targeting Lite," IMF Working Papers 03/12, International Monetary Fund. [Downloadable!]
  9. Ilan Goldfajn & Sergio R.C. Werlang, 2000. "The pass-through from depreciation to inflation : a panel study," Textos para discussão 423, Department of Economics PUC-Rio (Brazil). [Downloadable!]
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  11. Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements. [Downloadable!]
  12. Frederic S. Mishkin, 1999. "International Experiences with Different Monetary Policy Regimes," NBER Working Papers 6965, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One decade of inflation targeting in the world : What do we know and what do we need to know?," Working Papers Central Bank of Chile 101, Central Bank of Chile. [Downloadable!]
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  14. Philip R. Lane & G.M. Milesi-Ferretti, 2003. "International Financial Integration," Trinity Economics Papers 20031, Trinity College Dublin, Department of Economics. [Downloadable!]
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  15. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Working Papers in Applied Economic Theory 94-05, Federal Reserve Bank of San Francisco.
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  16. Klaus Schmidt-Hebbel & Matías Tapia, 2002. "Monetary Policy Implementation and Results in Twenty Inflation-Targeting Countries," Working Papers Central Bank of Chile 166, Central Bank of Chile. [Downloadable!]
  17. Carlos Robalo Marques, 2004. "Inflation persistence - facts or artefacts?," Working Paper Series 371, European Central Bank. [Downloadable!]
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  19. Yifan Hu, 2003. "Empirical Investigations of Inflation Targeting," Peterson Institute Working Paper Series WP03-6, Peterson Institute for International Economics. [Downloadable!]
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  21. Marques, Carlos Robalo & Neves, Pedro Duarte & da Silva, Afonso Goncalves, 2002. "Why should Central Banks avoid the use of the underlying inflation indicator?," Economics Letters, Elsevier, vol. 75(1), pages 17-23, March. [Downloadable!] (restricted)
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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. Beja, Jr., Edsel, 2007. "Win or Lose, It’s the Policy We Choose: Comparative economic performance of the inflation targeters," MPRA Paper 4833, University Library of Munich, Germany, revised 12 Sep 2007. [Downloadable!]
  2. Jorge Canales-Kriljenko & Turgut Kisinbay & Rodolfo Maino & Eric Parrado, 2006. "Setting the Operational Framework for Producing Inflation Forecasts," Working Papers Central Bank of Chile 362, Central Bank of Chile. [Downloadable!]
    Other versions:
  3. Charles Freedman & Douglas Laxton, 2009. "Why Inflation Targeting?," IMF Working Papers 09/86, International Monetary Fund. [Downloadable!]
  4. Juraj Antal & Michal Hlavacek & Tomas Holub, 2008. "Basic Characteristics of Inflation Targeting in the Czech Republic," Occasional Publications - Chapters in Edited Volumes, in: Katerina Smidkova (ed.), Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007, chapter 2, pages 18-34 Czech National Bank, Research Department. [Downloadable!]
  5. Olivier Jeanne & Lars E. O. Svensson, 2007. "Credible Commitment to Optimal Escape from a Liquidity Trap: The Role of the Balance Sheet of an Independent Central Bank," American Economic Review, American Economic Association, vol. 97(1), pages 474-490, March. [Downloadable!]
    Other versions:
  6. Marc-André Gosselin, 2007. "Central Bank Performance under Inflation Targeting," Working Papers 07-18, Bank of Canada. [Downloadable!]
  7. Nicoletta Batini & Douglas Laxton, 2006. "Under What Conditions Can Inflation Targeting Be Adopted? The Experience of Emerging Markets," Working Papers Central Bank of Chile 406, Central Bank of Chile. [Downloadable!]
  8. Fabián Gredig U. & Klaus Schmidt-Hebbel D. & Rodrigo O. Valdés P., 2008. "The Monetary Policy Horizon in Chile and Other Inflation-Targeting Countries," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 5-27, April. [Downloadable!]
    Other versions:
  9. Christopher W. Crowe, 2007. "Testing the Transparency Benefits of Inflation Targeting: Evidence from Private Sector Forecasts," IMF Working Papers 06/289, International Monetary Fund. [Downloadable!]
  10. Charles Freedman & Douglas Laxton, 2009. "IT Framework Design Parameters," IMF Working Papers 09/87, International Monetary Fund. [Downloadable!]
  11. Inci Ötker & Charles Freedman, 2009. "Country Experiences with the Introduction and Implementation of Inflation Targeting," IMF Working Papers 09/161, International Monetary Fund. [Downloadable!]
  12. Kevin X.D. Huang & Qinglai Meng, 2007. "Is Forward-Looking Inflation Targeting Destabilizing? The Role of Policy's Response to Current Output under Endogenous Investment," Working Papers 0704, Department of Economics, Vanderbilt University. [Downloadable!]
  13. Rose, Andrew & Mihov, Ilian, 2008. "Is Old Money Better than New? Duration and Monetary Regimes," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(13), pages 1-24. [Downloadable!]
    Other versions:
  14. Jane Sneddon Little & Teresa Foy Romano, 2008. "Inflation targeting: central bank practice overseas," Public Policy Brief, Federal Reserve Bank of Boston. [Downloadable!]
  15. Gabriel Fagan & Julián Messina, 2009. "Downward wage rigidity and optimal steady-state inflation," Working Paper Series 1048, European Central Bank. [Downloadable!]
  16. William B.P. Robson, 2009. "To the Next Level: From Gold Standard to Inflation Targets - to Price Stability?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 285, March. [Downloadable!]
  17. Turgut Kisinbay & Ondra Kamenik & Ali Alichi & Charles Freedman & Marianne Johnson & Kevin Clinton & Huigang Chen & Douglas Laxton, 2009. "Inflation Targeting Under Imperfect Policy Credibility," IMF Working Papers 09/94, International Monetary Fund. [Downloadable!]
  18. Marcel Peter & Geoffrey Heenan & Scott Roger, 2006. "Implementing Inflation Targeting: Institutional Arrangements, Target Design, and Communications," IMF Working Papers 06/278, International Monetary Fund. [Downloadable!]
  19. Kevin X.D. Huang & Qinglai Meng, 2007. "Distance to Frontier and the Big Swings of the Unemployment Rate: What Room is Left for Monetary Policy?," Kiel Working Papers 1348, Kiel Institute for the World Economy. [Downloadable!]
  20. Frederic Mishkin & Klaus Schmidt-Hebbel, 2006. "Does Inflation Targeting Make a Difference?," Working Papers Central Bank of Chile 404, Central Bank of Chile. [Downloadable!]
    Other versions:
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