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Setting the Operational Framework for Producing Inflation Forecasts

  • Turgut Kisinbay
  • Eric Parrado
  • Rodolfo Maino
  • Jorge Iván Canales Kriljenko

How should a central bank organize itself to produce the best possible inflation forecast? This paper discusses elements for building a comprehensive platform for an inflation forecasting framework. It describes the exercise of forecasting inflation as a production process, which induces a strict discipline concerning data management, information gathering, the use of a suitable statistical apparatus, and the exercise of sound communication strategies to reinforce reputation and credibility. It becomes critical how a central bank organizes itself to produce relevant macroeconomic forecasts, with special consideration to product design, the essential requirements needed in the forecasting process, and key related organizational issues. In addition, the paper proposes to factor into the process the authorities' policy responses to previous inflation forecasts in order to be consistent with the spirit of the inflation targeting framework.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/122.

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Length: 47
Date of creation: 01 May 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/122
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  18. Quah, Danny, 1995. "Measuring Core Inflation," CEPR Discussion Papers 1153, C.E.P.R. Discussion Papers.
  19. Lyziak, Tomasz, 2003. "Consumer inflation expectations in Poland," Working Paper Series 0287, European Central Bank.
  20. Douglas Laxton & Alasdair Scott & David Rose, 2009. "Developing a Structured Forecasting and Policy Analysis System to Support Inflation-Forecast Targeting (IFT)," IMF Working Papers 09/65, International Monetary Fund.
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