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Inflation Targeting: What Can the ECB Learn from the Recent Experience of the Bank of England?

  • Artis, Michael J
  • Mizen, Paul
  • Kontolemis, Zenon

Establishment of the European Central Bank presents a rare opportunity to define the operations of a central bank without a prior track record. This paper asks what might be learnt from the recent experience of inflation targeting at the Bank of England before the ECB specifies an, as yet undefined, operational target. The authors consider whether there should be single or multiple targets and which inflation measure should be used, if at all. If inflation is targeted then a forecast of its value becomes the intermediate variable. This raises an issue of transparency and the compensating supply of information necessary to fill the gap, but too much 'openness' can also be problematic. The ECB must be accountable and the contracting approach may be useful although being seen to 'say' and 'do' the same thing is ultimately most important.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 108 (1998)
Issue (Month): 451 (November)
Pages: 1810-25

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Handle: RePEc:ecj:econjl:v:108:y:1998:i:451:p:1810-25
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  1. Christina D. Romer & David H. Romer, 1996. "Federal Reserve Private Information and the Behavior of Interest Rates," NBER Working Papers 5692, National Bureau of Economic Research, Inc.
  2. Michael F. Bryan & Stephen G. Cecchetti, 1993. "The Consumer Price Index as a Measure of Inflation," NBER Working Papers 4505, National Bureau of Economic Research, Inc.
  3. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  4. International Monetary Fund, 1998. "The United Kingdom's Experience with Inflation Targeting," IMF Working Papers 98/87, International Monetary Fund.
  5. Goodhart, Charles A E, 1994. "What Should Central Banks Do? What Should Be Their Macroeconomic Objectives and Operations?," Economic Journal, Royal Economic Society, vol. 104(427), pages 1424-36, November.
  6. Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins II, 1997. "Efficient Inflation Estimation," NBER Working Papers 6183, National Bureau of Economic Research, Inc.
  7. Artis, M.J. & Kontolemis, Z.G., 1998. "Inflation Targeting and the European Central Bank," Economics Working Papers eco98/4, European University Institute.
  8. repec:sae:niesru:v:164:y::i:1:p:65-79 is not listed on IDEAS
  9. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
  10. Artis, Michael J & Kontolemis, Zenon G, 1998. "The European Central Bank and Inflation Targeting," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(1), pages 27-38, January.
  11. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
  12. Michael Woodford, 1994. "Nonstandard Indicators for Monetary Policy: Can Their Usefulness Be Judged from Forecasting Regressions?," NBER Chapters, in: Monetary Policy, pages 95-115 National Bureau of Economic Research, Inc.
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