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Inflation Targeting in Canada, New Zealand, Sweden, the United Kingdom, and in General

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  • Bennett T. McCallum

Abstract

This paper begins with a description of the inflation targeting arrangements currently in place in the four above-mentioned countries and their performance records through mid-1995 are reviewed. It is argued, however, that too little time has passed for conclusions to be drawn, so that tentative evaluations of inflation targeting need to be based on theoretical analysis and more generalized historical experiences. Accordingly, two alternative rationalizations are considered, one stemming from the literature on dynamic inconsistency and the other based on more pragmatic considerations. In addition, it is asked whether some other nominal magnitude might be preferable as a target variable and the issue of growth-rate versus growing-level target paths is addressed.

Suggested Citation

  • Bennett T. McCallum, 1996. "Inflation Targeting in Canada, New Zealand, Sweden, the United Kingdom, and in General," NBER Working Papers 5579, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5579
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    Cited by:

    1. Gartner, Manfred, 2000. " Political Macroeconomics: A Survey of Recent Developments," Journal of Economic Surveys, Wiley Blackwell, vol. 14(5), pages 527-561, December.
    2. Hilde Christiane Bjørnland, 1997. "Estimating Core Inflation - The Role of Oil Price Shocks and Imported Inflation," Discussion Papers 200, Statistics Norway, Research Department.
    3. Mishkin, Frederic S., 1998. "International Experiences With Different Monetary Policy Regimes," Seminar Papers 648, Stockholm University, Institute for International Economic Studies.
    4. Kumhof, Michael & Li, Shujing & Yan, Isabel, 2007. "Balance of payments crises under inflation targeting," Journal of International Economics, Elsevier, vol. 72(1), pages 242-264, May.
    5. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
    6. Moretti, Laura, 2014. "Inflation targeting and product market deregulation," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 372-386.
    7. Gürkaynak, Refet S. & Levin, Andrew & Swanson, Eric T, 2006. "Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the US, UK and Sweden," CEPR Discussion Papers 5808, C.E.P.R. Discussion Papers.
    8. Reifschneider, David L. & Stockton, David J. & Wilcox, David W., 1997. "Econometric models and the monetary policy process," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 1-37, December.
    9. Peter Mikek, 2004. "Inflation targeting and switch of fiscal regime in New Zealand," Applied Economics, Taylor & Francis Journals, vol. 36(2), pages 165-172.
    10. Juha Kilponen & David Mayes & Jouko Vilmunen, 1999. "Labour Market Flexibility in Northern Europe," One Europe or Several? Working Papers 2, One-Europe Programme.
    11. Michael Kumhof, 2002. "A Critical View of Inflation Targeting: Crises, Limited Sustaintability, and Aggregate Shocks," 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 8, pages 349-394 Central Bank of Chile.
    12. Aerdt C.F.J. Houben, 2001. "What central banks have learned: lessons from pre-EMU Europe," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 54(218), pages 289-311.
    13. Mishkin, Frederic S. & Savastano, Miguel A., 2001. "Monetary policy strategies for Latin America," Journal of Development Economics, Elsevier, vol. 66(2), pages 415-444, December.
    14. Frederic S Mishkin, 1997. "Strategies for Controlling Inflation," RBA Annual Conference Volume,in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
    15. repec:ipg:wpaper:2014-516 is not listed on IDEAS
    16. Engert, Walter & Selody, Jack, 1998. "Uncertainty and Multiple Paradigms of the Transmission Mechanism," Staff Working Papers 98-7, Bank of Canada.
    17. Devine, Máiréad & McCoy, Daniel, 1997. "Inflation Targeting: A Review of the Issues," Research Technical Papers 5/RT/97, Central Bank of Ireland.
    18. Michael J. Dueker & Andreas M. Fischer, 2006. "Do inflation targeters outperform non-targeters?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 431-450.
    19. Alfred Broaddus & Marvin Goodfriend, 1996. "Foreign exchange operations and the Federal Reserve," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 1-20.
    20. Francisco De A. Nadal-De Simone, 2001. "Inflation Targeters In Practice: A Lucky Lot?," Contemporary Economic Policy, Western Economic Association International, vol. 19(3), pages 239-253, July.
    21. McCallum, Bennett T., 1999. "Issues in the design of monetary policy rules," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 23, pages 1483-1530 Elsevier.
    22. Axel Löffler & Gunther Schnabl & Franziska Schobert, 2010. "Inflation Targeting by Debtor Central Banks in Emerging Market Economies," CESifo Working Paper Series 3138, CESifo Group Munich.
    23. Chan Guk Huh, 1996. "Some evidence on the efficacy of the UK inflation targeting regime: an out-of-sample forecast approach," International Finance Discussion Papers 565, Board of Governors of the Federal Reserve System (U.S.).
    24. Carlo Monticelli, 2000. "Structural Asymmetries and the Optimal Monetary Policy Instrument of the European Central Bank," Open Economies Review, Springer, vol. 11(1), pages 49-71, January.
    25. Andrew Levin & John B. Taylor, 2010. "Falling Behind the Curve: A Positive Analysis of Stop-Start Monetary Policies and the Great Inflation," NBER Working Papers 15630, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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