Lessons from Inflation Targeting in New Zealand
In: Inflation Targeting: Desing, Performance, Challenges
This paper uses the Reserve Bank of New Zealand’s model to combine a macroeconomic evaluation of the performance inflation targeting with an analysis of policy rules. The questions to answer are two: (i) what lessons can be obtained from the shocks that have been experienced and the response given to them?, and, (ii) which is the optimal response to different types of shock?. The model allows to treat some issues of interest for the implementation of this scheme, like the flexibility of the inflation target (which depends on the degree of credibility of the monetary authority), the optimal policy horizon (a intermediate horizon seems to achieve the best combination of inflation volatility and output) and the bandwidth (which implies a trade off between output volatility and inflation).
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|This chapter was published in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.) Inflation Targeting: Desing, Performance, Challenges, , chapter 12, pages 501-538, 2002.|
|This item is provided by Central Bank of Chile in its series Central Banking, Analysis, and Economic Policies Book Series with number v05c12pp501-538.|
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References listed on IDEAS
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- Aaron Drew & Ben Hunt, 1998. "The Forecasting and Policy System: preparing economic projections," Reserve Bank of New Zealand Discussion Paper Series G98/7, Reserve Bank of New Zealand.
- Gordon G. Thiessen, 1998. "The Canadian Experience with Targets for Inflation Control," Canadian Public Policy, University of Toronto Press, vol. 24(4), pages 415-428, December.
- Lewis Evans & Arthur Grimes & Bryce Wilkinson, 1996. "Economic Reform in New Zealand 1984-95: The Pursuit of Efficiency," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1856-1902, December.
- Aaron Drew & Adrian Orr, 1999. "The Reserve Bank's role in the recent business cycle: actions and evolutions," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
- Sean Collins & Francisco Nadal De Simone & David Hargreaves, 1998. "The current account balance: an analysis of the issues," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 61, March.
- Anne-Marie Brook & Sean Collins & Christie Smith, 1998. "The 1991-97 business cycle in review," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 61, December.
- Guy Debelle & Miguel A Savastano & Paul R Masson & Sunil Sharma, 1998. "Inflation Targeting as a Framework for Monetary Policy," IMF Economic Issues 15, International Monetary Fund.
- Norman Loayza & Klaus Schmidt-Hebbel, 2002. "Monetary Policy Functions and Transmission Mechanisms: An Overview," 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 1, pages 001-020 Central Bank of Chile.
- Peter Nicholl & David Archer, 1992. "An announced downward path for inflation," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 55, December.
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