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Evaluating Monetary Policy with Inflation Bands and Horizons

Author

Listed:
  • Troy Davig
  • Andrew Foerster

Abstract

Inflation targeting has become the dominant way countries approach setting monetary policy goals. However, central banks differ in how they conduct that policy and how they evaluate their success in meeting a stated inflation goal. A new assessment method combines a percentage range around a target, known as an inflation tolerance band, with central banks stating how long it will take for high or low inflation to return to that range, known as a time horizon. Comparing previously projected horizons with realized horizons can be used to evaluate policy success.

Suggested Citation

  • Troy Davig & Andrew Foerster, 2023. "Evaluating Monetary Policy with Inflation Bands and Horizons," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(05), pages 1-6, February.
    • Handle: RePEc:fip:fedfel:95687
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    References listed on IDEAS

    as
    1. Walsh, Carl E, 2015. "Goals and Rules in Central Bank Design," Santa Cruz Department of Economics, Working Paper Series qt3md9p6t5, Department of Economics, UC Santa Cruz.
    2. Carl E. Walsh, 2015. "Day Two Keynote Address: Goals and Rules in Central Bank Design," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 295-352, September.
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