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Inflation Targeting as a Stabilization Tool: Its Design and Performance in the Czech Republic

  • Viktor Kotlán
  • David Navrátil

The article focuses on the development and performance of inflation targeting in the Czech Republic. It is shown that the particulars of the Czech inflation-targeting regime developed from a rather specific setting toward a framework based on international best practices. Its performance is evaluated using three methods. The results suggest that even though inflation targets have been missed more often than met, the practice of inflation targeting has significantly contributed to the stabilization of the Czech economy.

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Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 53 (2003)
Issue (Month): 5-6 (May)
Pages: 220-242

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Handle: RePEc:fau:fauart:v:53:y:2003:i:5-6:p:220-242
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  1. Pierre L. Siklos, 1999. "Inflation-target design: changing inflation performance and persistence in industrial countries," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 46-58.
  2. Miroslav Hrncir & Katerina Smidkova, 2002. "The Czech approach to inflation targeting," Chapters, in: Financial and Monetary Integration in the New Europe, chapter 3 Edward Elgar.
  3. By Mohsin S. Khan & Abdelhak S. Senhadji, 2001. "Threshold Effects in the Relationship Between Inflation and Growth," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1.
  4. Kuttner, Kenneth N. & Posen, Adam S., 1999. "Does talk matter after all? Inflation targeting and central bank behavior," CFS Working Paper Series 1999/04, Center for Financial Studies (CFS).
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  6. Sutherland, Alan, 2001. "Inflation Targeting in a Small Open Economy," CEPR Discussion Papers 2726, C.E.P.R. Discussion Papers.
  7. Martin Èihák & Tomáš Holub, 1998. "Cílování inflace v ÈR: staré víno v nových lahvích (Inflation Targeting in the CR: Old Wine in New Bottles)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 48(4), pages 223-236, April.
  8. Neumann, Manfred J. M. & von Hagen, Jürgen, 2002. "Does inflation targeting matter?," ZEI Working Papers B 01-2002, ZEI - Center for European Integration Studies, University of Bonn.
  9. Stephen G. Cecchetti & Michael Ehrmann, 2002. "Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 9, pages 247-274 Central Bank of Chile.
  10. Cukierman, Alex, 2001. "Are Contemporary Central Banks Transparent about Economic Models and Objectives and What Difference Does it Make?," Discussion Paper Series 1: Economic Studies 2001,05, Deutsche Bundesbank, Research Centre.
  11. Chorng-Huey Wong & Eric V. Clifton & H. L. Leon, 2001. "Inflation Targeting and the Unemployment-Inflation Trade-off," IMF Working Papers 01/166, International Monetary Fund.
  12. Michal Skorepa & Viktor Kotlan, 2003. "Inflation Targeting: To Forecast or to Simulate?," Research and Policy Notes 2003/01, Czech National Bank, Research Department.
  13. Nicoletta Batini & Stephen P. Millard & Richard Harrison, 2000. "Monetary Policy Rules For An Open Economy," Computing in Economics and Finance 2000 361, Society for Computational Economics.
  14. Lavan Mahadeva & Katerina Smidkova, 2001. "What Is the Appropriate Rate of Disinflation to Be Targeted in the Czech Economy?," Archive of Monetary Policy Division Working Papers 2001/33, Czech National Bank.
  15. Papa M'B. P. N'Diaye & Douglas Laxton, 2002. "Monetary Policy Credibility and the Unemployment-Inflation Tradeoff: Some Evidence From 17 Industrial Countries," IMF Working Papers 02/220, International Monetary Fund.
  16. Professor Lars E O Svensson, 2001. "Independent review of the operation of monetary policy in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, March.
  17. Athanasios Orphanides & David W. Wilcox, 1996. "The opportunistic approach to disinflation," Finance and Economics Discussion Series 96-24, Board of Governors of the Federal Reserve System (U.S.).
  18. Jarkko Soikkeli, 2002. "The Inflation Targeting Framework in Norway," IMF Working Papers 02/184, International Monetary Fund.
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