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

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

Abstract

The establishment of the European Central Bank (ECB) presents a rare opportunity to define the operations of a central bank with no prior track record. Before the ECB specifies an, as yet undefined, operational target this paper asks what might be learnt from the recent experience of inflation targeting at the Bank of England. We consider whether there should be single or multiple targets and which, if any, of the existing inflation measures should be used. If inflation is targeted then a forecast of its value becomes the intermediate variable. This raises both the issue of transparency and the issue of providing a compensating supply of information material 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, but being seen to ‘say’ and ‘do’ the same thing is ultimately of the most importance.

Suggested Citation

  • Artis, Michael J & Kontolemis, Zenon G & Mizen, Paul D, 1998. "Inflation Targeting: What can the ECB Learn from the Recent Experience of the Bank of England," CEPR Discussion Papers 1941, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1941
    as

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    References listed on IDEAS

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    1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, January.
    2. 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 1424-1436, November.
    3. Michael F. Bryan & Stephen G. Cecchetti, 1993. "The consumer price index as a measure of inflation," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 15-24.
    4. Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins II, 1997. "Efficient Inflation Estimation," NBER Working Papers 6183, National Bureau of Economic Research, Inc.
    5. 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.
    6. repec:sae:niesru:v:164:y::i:1:p:65-79 is not listed on IDEAS
    7. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
    8. Gallo Giampiero M. & Pacini Barbara, 1998. "Early News is Good News: The Effects of Market Opening on Market Volatility," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, pages 1-19.
    9. International Monetary Fund, 1998. "The United Kingdom's Experience with Inflation Targeting," IMF Working Papers 98/87, International Monetary Fund.
    10. 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.
    11. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, pages 150-167.
    12. 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.
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    Citations

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    Cited by:

    1. Andrade, E., 2002. "Bacen e BoE: Uma Analise Comparativa do Nivel de Transparencia," Insper Working Papers wpe_12, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    2. Kamal, Mona, 2010. "تجربة الاتحاد النقدي الأوروبي في مجال التنسيق بين السياستين المالية والنقدية
      [The Experience of the European Monetary Union in the Coordination of Monetary and Fiscal Policies]
      ," MPRA Paper 27764, University Library of Munich, Germany.
    3. Andrade, E., 2002. "Bacen e BCs Selecionados: Uma Analise Comparativa do Nivel de Transparencia," Insper Working Papers wpe_13, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    4. Shu-ki Tsang, 2002. "Inflation Targeting in China?," Working Papers 192002, Hong Kong Institute for Monetary Research.
    5. Kirsten Lommatzsch & Silke Tober, 2004. "The Inflation Target of the ECB: Does the Balassa-Samuelson Effect Matter?," EUI-RSCAS Working Papers 19, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    6. Silke Tober, 2015. "Monetary Financing in the Euro Area: A Free Lunch?," IMK Working Paper 152-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Zenon Kontolemis, 2002. "Money Demand in the Euro Area; Where Do We Stand (Today)?," IMF Working Papers 02/185, International Monetary Fund.
    8. Hossein Samiei & Jan Kees Martijn, 1999. "Central Bank Independence and the Conduct of Monetary Policy in the United Kingdom," IMF Working Papers 99/170, International Monetary Fund.

    More about this item

    Keywords

    Accountability; Bank of England; Central Bank; ECB; Inflation Targeting;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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