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Inflation Targets in a Global Context

In: Inflation Targeting: Desing, Performance, Challenges

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  • Gabriel Sterne

    (Bank of England)

Abstract

Inflation targeting has become a global framework, used by countries of many different types and in all the continents of the world. To assess its global contribution, this paper uses one of the broadest ever surveys of monetary policy frameworks to construct an overall picture from the individual jigsaw pieces of framework characteristics. The jigsaw is made of targets and other measures of policy reaction, institutional characteristics such as independence, accountability and transparency, and analytical capacities within the central bank. The paper notes that the use of inflation targets has spread very rapidly in the 1990s, far more so than has the number of "inflation targeting" frameworks. The analysis focuses on the flexible use of inflation (and money) targets, and how these relate to indicators of each of central bank reaction functions, independence, accountability, transparency, and analytical methods. The use of targets appears to have built a strong momentum towards explanation of policy, and the use of inflation targets in particular has provided a vehicle for communication between central banks and governments and the private sector.
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Suggested Citation

  • Gabriel Sterne, 2002. "Inflation Targets in a Global Context," Central Banking, Analysis, and Economic Policies Book Series,in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 2, pages 023-078 Central Bank of Chile.
  • Handle: RePEc:chb:bcchsb:v05c02pp023-078
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    File URL: http://si2.bcentral.cl/public/pdf/banca-central/pdf/v5/023_078Sterne.pdf
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    References listed on IDEAS

    as
    1. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110.
    2. Mahadeva, Lavan & Sterne, Gabriel, 2002. "Inflation Targets as a Stabilization Device," Manchester School, University of Manchester, vol. 70(4), pages 619-650, Special I.
    3. Lavan Mahadeva & Katerina Smidkova, 2004. "Modelling transmission mechanism of monetary policy in the Czech Republic," Macroeconomics 0402032, EconWPA.
    4. Miguel A Savastano & Paul R Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
    5. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, January.
    6. Cottarelli, C. & Giannini, C., 1997. "Credibility without Rules? Monetary Frameworks in the Post-Bretton Woods Era," Papers 312, Banca Italia - Servizio di Studi.
    7. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2002. "Does it pay to be transparent? international evidence form central bank forecasts," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 99-118.
    8. Gerlach, Stefan, 1999. "Who targets inflation explicitly?," European Economic Review, Elsevier, vol. 43(7), pages 1257-1277, June.
    9. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
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    Citations

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    Cited by:

    1. Antonio Fatás & Ilian Mihov & Andrew K. Rose, 2007. "Quantitative Goals for Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1163-1176, August.
    2. Lavan Mahadeva & Gabriel Sterne, 2002. "The role of short-run inflation targets and forecasts in disinflation," Bank of England working papers 167, Bank of England.
    3. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
    4. Philip Arestis & Luiz Fernando de Paula & Fernando Ferrari-Filho, 2006. "Inflation Targeting In Emerging Countries: The Case Of Brazil," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 42, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements.
    6. Alvaro Angeriz & Philip Arestis, 2008. "Assessing inflation targeting through intervention analysis," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 293-317, April.
    7. Ferro, Gustavo, 2007. "Metas de inflación ¿qué hay de nuevo bajo el sol?
      [Inflation Targeting. What's new under the sun?]
      ," MPRA Paper 15069, University Library of Munich, Germany, revised 11 Mar 2008.
    8. Runchana Pongsaparn & Panda Ketruangroch & Dhanaporn Hirunwong, 2012. "Monetary Policy conduct in Review: The Appropriate Choice of Instruments," Working Papers 2012-05, Monetary Policy Group, Bank of Thailand.
    9. J. Benson Durham, 2001. "Sacrifice ratios and monetary policy credibility: do smaller budget deficits, inflation-indexed debt, and inflation targets lower disinflation costs?," Finance and Economics Discussion Series 2001-47, Board of Governors of the Federal Reserve System (U.S.).

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