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Setting the Operational Framework for Producing Inflation Forecasts

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Author Info

  • Turgut Kisinbay
  • Eric Parrado
  • Rodolfo Maino
  • Jorge Iván Canales Kriljenko

Abstract

How should a central bank organize itself to produce the best possible inflation forecast? This paper discusses elements for building a comprehensive platform for an inflation forecasting framework. It describes the exercise of forecasting inflation as a production process, which induces a strict discipline concerning data management, information gathering, the use of a suitable statistical apparatus, and the exercise of sound communication strategies to reinforce reputation and credibility. It becomes critical how a central bank organizes itself to produce relevant macroeconomic forecasts, with special consideration to product design, the essential requirements needed in the forecasting process, and key related organizational issues. In addition, the paper proposes to factor into the process the authorities'' policy responses to previous inflation forecasts in order to be consistent with the spirit of the inflation targeting framework.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/122.

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Length: 47
Date of creation: 01 May 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/122

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Keywords: Central bank organization; Inflation targeting; Central bank policy; Data collection; Data analysis; Forecasting models; inflation; monetary policy; central bank; inflation forecasts; long-term interest rates; terms of trade; forecasting inflation; inflation target; monetary fund; monetary aggregates; inflation targeting framework; monetary transmission; inflationary pressures; monetary policy decisions; aggregate demand; inflationary expectations; monetary transmission mechanism; monetary policy framework; measure of inflation; real interest rates; monetary authority; national bank; monetary policy reaction function; monetary economics; monetary targeting; inflation process; monetary policy rules; monetary base; inflation objective; money demand; relative prices; monetary decisions; wage inflation; low inflation; monetary policy strategy; monetary framework; monetary policy decision; price stability; monetary control; monetary disturbances; inflation targeting regime; monetary regime; monetary factors; inflation data; inflation dynamics;

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References

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  1. Gilda Fernandez & Cem Karacadag & Rupa Duttagupta, 2004. "From Fixed to Float," IMF Working Papers, International Monetary Fund 04/126, International Monetary Fund.
  2. Frederic S Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," RBA Annual Conference Volume, Reserve Bank of Australia, in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
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  17. Lyziak, Tomasz, 2003. "Consumer inflation expectations in Poland," Working Paper Series, European Central Bank 0287, European Central Bank.
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Citations

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Cited by:
  1. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "A Practical Model-Based Approach to Monetary Policy Analysis: Overview," IMF Working Papers, International Monetary Fund 06/80, International Monetary Fund.
  2. International Monetary Fund, 2010. "Weathering the Global Storm," IMF Working Papers, International Monetary Fund 10/292, International Monetary Fund.
  3. Marcel Peter & Scott Roger & Geoffrey Heenan, 2006. "Implementing Inflation Targeting," IMF Working Papers, International Monetary Fund 06/278, International Monetary Fund.
  4. Héctor Cuasquer & René Maldonado, 2011. "Microfinanzas y microcrédito en Latinoamérica," Boletín, Centro de Estudios Monetarios Latinoamericanos, Centro de Estudios Monetarios Latinoamericanos, vol. 0(4), pages 179-193, Octubre-d.
  5. Jorge Iván Canales-Kriljenko & Luis I. Jácome H. & Ali Alichi & Ivan Luis de Oliveira Lima, 2011. "Sorteando la tormenta mundial: beneficios de la reforma de política monetaria en cinco países latinoamericanos," Boletín, Centro de Estudios Monetarios Latinoamericanos, Centro de Estudios Monetarios Latinoamericanos, vol. 0(4), pages 194-226, Octubre-d.

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