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Econometric Inflation Targeting

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Author Info

  • Gunnar Bårdsen

    ()
    (Department of Economics, Norwegian University of Science and Technology)

  • Eilev S. Jansen

    ()
    (Norges Bank and Department of Economics, Norwegian University of Science and Technology)

  • Ragnar Nymoen

    ()
    (Department of Economics, University of Oslo)

Abstract

Inflation targeting requires inflation forecasts, yet most models in the literature are either theoretical or calibrated. The motivation for this paper is therefore threefold: We seek to test and implement an econometric model forforecasting inflation in Norway–one economy recently opting for formal inflation targeting rather than a managed nominal exchange rate. We also seek to quantify the relative importance of the di?erent transmission mechanisms– with basis in empirical estimates rather than calibrated values. Finally, we want to focus on and exploit econometric issues required in the design and estimation of econometric models used for inflation forecasting and policy analysis.

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File URL: http://www.svt.ntnu.no/iso/WP/2002/5inftarg.pdf
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Bibliographic Info

Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 0502.

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Length: 52 pages
Date of creation: 13 Apr 1999
Date of revision: 30 Oct 2001
Handle: RePEc:nst:samfok:0502

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Postal: 7491 Trondheim
Phone: 73 59 19 40
Fax: 73 59 69 54
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Web page: http://www.svt.ntnu.no/iso/WP/wp.htm
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Related research

Keywords: inflation targeting; monetary policy; wages and prices; cointegration; dynamic modelling;

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References

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  1. Steinar Holden, 2003. "Wage-setting under Different Monetary Regimes," Economica, London School of Economics and Political Science, vol. 70(278), pages 251-265, 05.
  2. Rudebusch, Glenn D & Svensson, Lars E O, 1998. "Policy Rules for Inflation Targeting," CEPR Discussion Papers 1999, C.E.P.R. Discussion Papers.
  3. Johansen, Kare, 1995. "Norwegian Wage Curves," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(2), pages 229-47, May.
  4. Engle, Robert F. & Hendry, David F., 1993. "Testing superexogeneity and invariance in regression models," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 119-139, March.
  5. Akram, Q.F., 2000. "When does the Oil Price Affect the Norwegian Exchange Rate?," Economics Series Working Papers 9931, University of Oxford, Department of Economics.
  6. Andrew G. Haldane & Nicoletta Batini, 1998. "Forward-Looking Rules for Monetary Policy," NBER Working Papers 6543, National Bureau of Economic Research, Inc.
  7. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  9. Dag Kolsrud & Ragnar Nymoen, 1998. "Unemployment and the open economy wage-price spiral," Journal of Economic Studies, Emerald Group Publishing, vol. 25(6), pages 450-467, October.
  10. Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-99, October.
  11. Jordi Gali & Mark Gertler, 2000. "Inflation Dynamics: A Structural Econometric Analysis," NBER Working Papers 7551, National Bureau of Economic Research, Inc.
  12. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  13. Rodseth,A. & Nymoen,R., 1999. "Nordic wage formation and unemployment seven years later," Memorandum 10/1999, Oslo University, Department of Economics.
  14. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  15. Paul G. Fisher & Gunnar BÅrdsen, 1999. "Economic theory and econometric dynamics in modelling wages and prices in the United Kingdom," Empirical Economics, Springer, vol. 24(3), pages 483-507.
  16. Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies.
  17. Neil R. Ericsson & John S. Irons, 1995. "The Lucas critique in practice: theory without measurement," International Finance Discussion Papers 506, Board of Governors of the Federal Reserve System (U.S.).
  18. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  19. �istein R�island & Ragnar Torvik, 2004. "Exchange rate versus inflation targeting: a theory of output fluctuations in traded and non-traded sectors," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 13(3), pages 265-285.
  20. Tor Jacobson & Per Jansson & Anders Vredin & Anders Warne, 2001. "Monetary policy analysis and inflation targeting in a small open economy: a VAR approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(4), pages 487-520.
  21. Hendry, D.F. & Mizon, G.E., 1990. "Evaluating Dynamic Econometric Models By Encompassing The Var," Economics Series Working Papers 99102, University of Oxford, Department of Economics.
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