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- Soyoung Kim & Geunhyung Yim (2016): Endogeneity of Inflation Target
Under inflation targeting, central banks set an inflation target in advance and then try to make an actual inflation hit the target. However, central banks may have an incentive to adjust the target to actual inflation rates such as past inflation rates, to make the actual inflation rate close to the target. This paper examines this issue of "endogeneity of inflation target" by using various empirical methods with the sample of 19 inflation targeting countries. Empirical results show that an inflation rate has significantly positive effect on the inflation target of the next period. Empirical results further suggest that this endogeneity of the inflation target is found more strongly in central banks with low credibility or weak performance than in central banks with high credibility or strong performance.
RePEc:bok:wpaper:1618 Save to MyIDEAS - Svensson, Lars E.O. & Rudebusch , Glenn (1998): Policy Rules for Inflation Targeting
Policy rules that are consistent with inflation targeting are examined in a small macroeconometric model of the US economy. We compare the properties and outcomes of explicit 'instrument rules' as well as 'targeting rules'. The latter, which imply implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that inflation forecasts are central for good policy rules under inflation targeting. Some simple instrument and targeting rules do remarkably well relative to the optimal rule; others, including some that are often used as representing inflation targeting, do less well.
RePEc:hhs:iiessp:0637 Save to MyIDEAS - Peter Sinclair (2011): Inflation Targeting Dilemmas
This paper poses, and then attempts to answer, eleven questions about the principles and practice of inflation targeting under contemporary conditions.
RePEc:bir:birmec:11-23 Save to MyIDEAS - Meshcheryakov, A. & Sukhomlinov, A. (2024): Considerations regarding inflation target levels
Most studies on the optimal level of the inflation target point to the necessity for the central bank to maintain full price stability in the economy. At the same time, global experience of inflation targeting, as well as diverse communication of central banks indicate the heterogeneity of inflation target levels and a variety of factors behind their choice. This paper considers a wide range of approaches to determining the most appropriate level of the inflation target for the economy. The systematization of the global practice and theory of monetary policy, as well as the results of the Bank of Russia's Monetary Policy Review, indicate significant benefits of a potential lowering of the inflation target level in Russia in the future from the current 4%. However, as the Bank of Russia officially communicates, an assessment of the feasibility and timing of lowering the inflation target is possible after inflation stabilizes near 4% and general economic uncertainty is reduced.
RePEc:nea:journl:y:2024:i:62:p:246-254 Save to MyIDEAS - David Marek (2000): Inflation Targeting Countries' Experience
Inflation targeting is historically the youngest strategy in the practice of monetary policy. Successfully pioneered by New Zealand, inflation-targeting schemes are now well established in several central banks, including the Czech National Bank (CNB).The experiences of other inflation-targeting central banks may offer lessons for the CNB. ... approaches to inflation targeting, Marek focuses on the confrontation of institutional arrangements, the practices of inflation targeting, realized monetary policy, and the challenge central banks faced in implementing inflation-targeting regimes. ... experiences are analyzed on a case-by-case basis, toward isolating the best modes of the inflation-targeting framework.
RePEc:fau:fauart:v:50:y:2000:i:5:p:283-293 Save to MyIDEAS - Kim, Soyoung & Yim, Geunhyung (2020): Do inflation-targeting central banks adjust inflation targets to meet the target?
Under inflation targeting, central banks are supposed to set an inflation target in advance and then try to make the actual inflation reach the target. However, central banks may have an incentive to adjust their targets to meet their goals. Panel data analysis with a sample of 19 inflation-targeting countries show that changes in the inflation target significantly and positively respond to the deviation of the inflation rate from the target in the previous period. This result supports the idea that inflation-targeting central banks adjust the inflation target to meet the target when they miss it. ... This result may imply that when central banks respond to missed inflation targets by adjusting their targets and to enhance the credibility and stabilize the inflation rate, they may end up destabilizing inflation expectations and the inflation rate.
RePEc:eee:dyncon:v:113:y:2020:i:c:s0165188920300282 Save to MyIDEAS - Guy Debelle (1999): Inflation Targeting and Output Stabilisation
Inflation targeting has been criticised for being ‘inflation only’ targeting and hence, for ignoring output and employment. ... The inflation-targeting framework has sufficient flexibility to allow for the short-run trade-off between output and inflation. The extent to which it does so in part reflects some design features of the inflation-targeting framework, such as targeting bands and the policy horizon, that have been adopted in practice in the inflation-targeting countries. Medium-term price stability can be maintained while still allowing some degree of short-run inflation variability, thus providing scope for lower output variability.
RePEc:rba:rbardp:rdp1999-08 Save to MyIDEAS - Milas, Costas & Dergiades, Theologos & Panagiotidis, Theodore & Papapanagiotou, Georgios (2024): An assessment of inflation targeting
The effectiveness of inflation targeting is linked to the stationarity properties of inflation. Without making apriori assumptions about the order of integration, we examine whether there is a change in the inflation persistence in one hundred and twenty-seven countries (developed and developing) using monthly data over the 1970–2021 period. For the inflation targeters, we find that the endogenously identified break dates are not consistent with the formal adoption of IT. Logit analysis reveals that inflation targeters do not experience an increased probability of a change in inflation persistence. The quality of institutions emerges as more significant for taming inflation.
RePEc:eee:quaeco:v:97:y:2024:i:c:s1062976924001030 Save to MyIDEAS - Costas Milas & Theologos Dergiades & Theodore Panagiotidis & Georgios Papapanagiotou (2024): An assessment of inflation targeting
The effectiveness of inflation targeting is linked to the stationarity properties of inflation. Without making apriori assumptions about the order of integration, we examine whether there is a change in the inflation persistence in one hundred and twenty-seven countries (developed and developing) using monthly data over the 1970-2021 period. For the inflation targeters, we find that the endogenously identified break dates are not consistent with the formal adoption of IT. Logit analysis reveals that inflation targeters do not experience an increased probability of a change in inflation persistence. The quality of institutions emerges as more significant for taming inflation.
RePEc:rim:rimwps:24-12 Save to MyIDEAS - Costas Milas & Theologos Dergiades & Theodore Panagiotidis & Georgios Papapanagiotou (2024): An Assessment of Inflation Targeting
TThe effectiveness of inflation targeting is linked to the stationarity properties of inflation. Without making apriori assumptions about the order of integration, we examine whether there is a change in the inflation persistence in one hundred and twenty-seven countries (developed and developing) using monthly data over the 1970-2021 period. For the inflation targeters, we find that the endogenously identified break dates are not consistent with the formal adoption of IT. Logit analysis reveals that inflation targeters do not experience an increased probability of a change in inflation persistence. The quality of institutions emerges as more significant for taming inflation.
RePEc:mcd:mcddps:2024_05 Save to MyIDEAS