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Implementing Inflation Targeting

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Author Info

  • Marcel Peter
  • Scott Roger
  • Geoffrey Heenan

Abstract

Transparency is a central element in most aspects of the design and operation of inflation targeting regimes. This paper focuses on three elements of inflation targeting most closely associated with transparency: (i) the institutional arrangements supporting inflation targeting; (ii) the specification of the inflation target; and (iii) the central bank''s policy communications. The paper is primarily aimed at providing practical advice to countries planning to develop an inflation targeting framework, but many of the issues are relevant for any credible, independent monetary policy.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/278.

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Length: 57
Date of creation: 01 Dec 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/278

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Related research

Keywords: Inflation targeting; inflation; central bank; monetary policy; inflation target; price stability; monetary fund; low inflation; inflation objective; inflation targeting framework; monetary policy decision; rate of inflation; foreign exchange; inflationary expectations; inflation forecasts; transmission of monetary policy; aggregate demand; price level; monetary policy decisions; inflation targeting regime; national bank; monetary stability; monetary policy framework; monetary economics; inflation rate; independent monetary policy; terms of trade; monetary policy implications; relative prices; gdp deflator; monetary transmission; measure of inflation; monetary policy transmission mechanism; relative price; financial stability; neutrality of money; inflation rates; low levels of inflation; domestic money markets; high inflation; independent ? central bank; rates of inflation; monetary system; monetary transmission mechanism; tight monetary policy; inflation equation; costs of inflation; monetary frameworks; monetary policy strategy; average price level; lower inflation; monetary policy instruments; inflation process; monetary policy transparency; optimal monetary policy; inflationary policy; monetary systems; inflationary conditions; annual inflation; monetary targeting; nominal interest rates; money balances; macroeconomic performance;

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References

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  1. Eijffinger, S.C.W. & Geraats, P.M., 2004. "How Transparent Are Central Banks?," Cambridge Working Papers in Economics 0411, Faculty of Economics, University of Cambridge.
  2. Seth B. Carpenter, 2004. "Transparency and monetary policy: what does the academic literature tell policymakers?," Finance and Economics Discussion Series 2004-35, Board of Governors of the Federal Reserve System (U.S.).
  3. Frederic S. Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," NBER Working Papers 10829, National Bureau of Economic Research, Inc.
  4. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
  5. Haan, J. de & Amtenbrink, F. & Eijffinger, S.C.W., 1998. "Accountability of Central Banks: Aspects and Quantification," Discussion Paper 1998-54, Tilburg University, Center for Economic Research.
  6. Fischer, Stanley, 1995. "Central-Bank Independence Revisited," American Economic Review, American Economic Association, vol. 85(2), pages 201-06, May.
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  8. Glenn D. Rudebusch & John C. Williams, 2006. "Revealing the Secrets of the Temple: The Value of Publishing Central Bank Interest Rate Projections," NBER Working Papers 12638, National Bureau of Economic Research, Inc.
  9. Paul Jackman, 2002. "The Reserve Bank's external communications," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, March.
  10. Peter Stella, 2005. "Central Bank Financial Strength, Transparency, and Policy Credibility," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 335-365, September.
  11. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  12. Clive Briault & Andrew Haldane & Mervyn King, 1996. "Independence and Accountability," Bank of England working papers 49, Bank of England.
  13. Turgut Kisinbay & Eric Parrado & Rodolfo Maino & Jorge Iván Canales Kriljenko, 2006. "Setting the Operational Framework for Producing Inflation Forecasts," IMF Working Papers 06/122, International Monetary Fund.
  14. Anita Tuladhar, 2005. "Governance Structures and Decision-Making Roles in Inflation-Targeting Central Banks," IMF Working Papers 05/183, International Monetary Fund.
  15. Paul Conway, 2000. "Monetary policy in an uncertain world," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, September.
  16. Jérôme Vandenbussche, 2006. "Elements of Optimal Monetary Policy Committee Design," IMF Working Papers 06/277, International Monetary Fund.
  17. JoAnne Morris & Tonny Lybek, 2004. "Central Bank Governance," IMF Working Papers 04/226, International Monetary Fund.
  18. Michael Woodford, 2005. "Central-bank communication and policy effectiveness," Discussion Papers 0506-07, Columbia University, Department of Economics.
  19. Bernard Laurens & Marco Arnone & Jean-François Segalotto, 2006. "The Measurement of Central Bank Autonomy," IMF Working Papers 06/227, International Monetary Fund.
  20. Douglas Laxton & Alasdair Scott & David Rose, 2009. "Developing a Structured Forecasting and Policy Analysis System to Support Inflation-Forecast Targeting (IFT)," IMF Working Papers 09/65, International Monetary Fund.
  21. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  22. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  23. Scott Roger & Mark R. Stone, 2005. "On Target? the International Experience with Achieving Inflation Targets," IMF Working Papers 05/163, International Monetary Fund.
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Citations

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Cited by:
  1. Dimas M. Fazio & Benjamin M. Tabak & Daniel O. Cajueiro, 2014. "Inflation Targeting and Banking System Soundness: A Comprehensive Analysis," Working Papers Series 347, Central Bank of Brazil, Research Department.
  2. International Monetary Fund, 2010. "Weathering the Global Storm," IMF Working Papers 10/292, International Monetary Fund.
  3. Mordecai Avriel & Jens Hilscher & Alon Raviv, 2013. "Inflation Derivatives Under Inflation Target Regimes," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 33(10), pages 911-938, October.
  4. 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, vol. 0(4), pages 194-226, Octubre-d.
  5. Petreski, Marjan, 2013. "Inflation targeting at the crossroads: Evidence from post-communist economies during the crisis," MPRA Paper 47018, University Library of Munich, Germany.
  6. Pierre L. Siklos, 2008. "Inflation Targeting Around the World," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(6), pages 17-37, November.
  7. Héctor Cuasquer & René Maldonado, 2011. "Microfinanzas y microcrédito en Latinoamérica," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(4), pages 179-193, Octubre-d.
  8. Alexandra Peter & Sarwat Jahan & Edward R. Gemayel, 2011. "What Can Low-Income Countries Expect From Adopting Inflation Targeting?," IMF Working Papers 11/276, International Monetary Fund.
  9. Jenish Nurbek & Kyrgyzbaeva Asel, 2012. "On the Possibility of Inflation Targeting in Kyrgyzstan," EERC Working Paper Series 12/10e, EERC Research Network, Russia and CIS.
  10. Ales Bulir & Katerina Smídková, 2008. "Striving to Be "Clearly Open" and "Crystal Clear"," IMF Working Papers 08/84, International Monetary Fund.
  11. Diewert, Erwin, 2007. "The Ottawa Group after Ten Meetings: Future Priorities," Economics working papers diewert-07-11-16-12-30-23, Vancouver School of Economics, revised 16 Nov 2007.
  12. Kateøina Šmídková & Aleš Bulíø, 2007. "Striving to Be “Clearly Open” and “Crystal Clear”: Monetary Policy Communication of the CNB," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(11-12), pages 540-557, December.

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