Toward Inflation Targeting in Sri Lanka
AbstractThis paper develops a practical model-based forecasting and policy analysis system (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulations suggest that an open-economy inflation targeting rule can reduce macroeconomic volatility and anchor inflationary expectations given the size and type of shocks faced by the economy. Sri Lanka could aim to target a broad inflation range initially due to its susceptibility supply-side shocks while enhancing exchange rate flexibility and strengthening the effectiveness of monetary policy in the transition to an inflation forecast targeting regime.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/81.
Date of creation: 01 Apr 2011
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-14 (All new papers)
- NEP-CBA-2011-05-14 (Central Banking)
- NEP-FOR-2011-05-14 (Forecasting)
- NEP-MAC-2011-05-14 (Macroeconomics)
- NEP-MON-2011-05-14 (Monetary Economics)
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