The paper tries to derive lessons from the UK experience with inflation targeting (IT) for the Czech monetary policy. Reasons for introducing the IT in both countries have been very similar. After intermediate targets failed, both central banks searched for a new strategy. When implementing the IT scheme, their approaches have been very similar although in some cases different tools have been implemented in order to overcome generally recognized problems. For example, flexibility has been gained by reduction in targeted index in the Czech case while explicit exemptions have been introduced in the UK case. The UK experience with the IT shows that inflation might be reduced towards targeted level faster than expected. Some other policy dilemmas from the UK experience appear relevant for the Czech central bank. For example, due to exchange-rate appreciation, domestically produced inflation might exceed aggregate inflation. The paper also concentrates on role of forecasting in the IT framework.
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Publisher Info
Paper provided by EconWPA in its series Macroeconomics with number
0304006.
Length: 21 pages Date of creation: 11 Apr 2003 Date of revision: Handle: RePEc:wpa:wuwpma:0304006
Note: Type of Document - ; pages: 21 . This policy note from 1998 has not been published elsewhere. Contact details of provider: Web page: http://129.3.20.41
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