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- Motilal Bicchal & Naoyuki Yoshino & Rajendra N. Paramanik & Anoop S. Kumar (2022): Assessing the Credibility of Inflation-Targeting Central Banks
This paper creates an asymmetric credibility indicator to measure the credibility of inflation-targeting central banks. The proposed indicator is computed for a sample of eight representative central banks using the inflation expectations survey data of professional forecasters and observed inflation data. The computed indicators are then used in the panel models to explore the credibility effect for central banks of emerging and advanced economies. ... It makes the elements of backward-looking expectations insignificant and considerably increases the relative weight of the inflation target in the expectations formation. ... These findings have important policy implications for the conduct of monetary policy that credible inflation-targeting central banks can anchor forecasters’ inflation expectations in the crisis period such as COVID-19 crisis.
RePEc:spr:isbchp:978-981-16-7062-6_5 Save to MyIDEAS - Tachibana, Minoru (2013): How have inflation-targeting central banks responded to supply shocks?
This paper examines how inflation-targeting central banks have responded to supply shocks, based on the sign-restriction VAR approach. It is found that inflation-targeting central banks have become accommodative to adverse supply shocks following the adoption of inflation targeting.
RePEc:eee:ecolet:v:121:y:2013:i:1:p:1-3 Save to MyIDEAS - Rania A. Al-Mashat & Mr. Aleš Bulíř & N. Nergiz Dinçer & Tibor Hlédik & Mr. Tomás Holub & Asya Kostanyan & Mr. Douglas Laxton & Armen Nurbekyan & Mr. Rafael A Portillo & Hou Wang (2018): An Index for Transparency for Inflation-Targeting Central Banks: Application to the Czech National Bank
This paper develops a new central bank transparency index for inflation-targeting central banks (CBT-IT index). It applies the CBT-IT index to the Czech National Bank (CNB), one of the most transparent inflation-targeting central banks. The CNB has invested heavily in developing a Forecasting and Policy Analysis System (FPAS) to implement a full-fledged inflation-forecast-targeting (IFT) regime.
RePEc:imf:imfwpa:2018/210 Save to MyIDEAS - Eurilton Araújo & Débora Gouveia (2013): Calvo-type rules and the forward-looking behavior of inflation targeting central banks
We estimate small open economy models in which inflation targeting central banks respond to a discounted infinite sum of expected inflation and output gaps (Calvo-type rules). The results support Calvo-type rules for Australia and Canada, and suggest longer targeting horizons for inflation compared with output gaps.
RePEc:ebl:ecbull:eb-13-00474 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 - Pavasuthipaisit, Robert (2010): Should inflation-targeting central banks respond to exchange rate movements?
This paper examines whether it is optimal for inflation-targeting central banks to respond to exchange-rate movements. The paper finds that exchange-rate movements can provide a signal on the developments in the economy that the central bank cannot perfectly observe. The results suggest that when the degrees of exchange-rate pass-through and international financial integration are high, it is optimal for the central bank to pay more attentions to exchange-rate movements. These results however depend on two conditions: 1) the ability of the central bank to observe the true exchange-rate process and 2) the number of real frictions in the model economy.
RePEc:eee:jimfin:v:29:y:2010:i:3:p:460-485 Save to MyIDEAS - Jane Sneddon Little & Teresa Foy Romano (2008): Inflation targeting: central bank practice overseas
This policy brief, which is based on an internal memo, summarizes the institutional and operational features observed in the 27 countries that have gained experience with inflation targeting (IT). ... choices concerning such key issues as how they treat the borders of the target range. On the whole, most IT banks have chosen to practice inflation targeting in a more flexible and, thus, resilient fashion than many analysts once feared?... Fortunately, one key lesson that emerges from our experience to date is that much of the ability of inflation targeting to help moor inflation expectations likely stems from the premium it places on improving transparency standards. These standards are available to all central banks, whether they choose to practice inflation targeting or not.
RePEc:fip:fedbpb:y:2008:n:08-1 Save to MyIDEAS - Woodford, Michael (2013): Forward Guidance by Inflation-Targeting Central Banks
This paper assesses the value of central-bank communication about likely future policy, with particular reference to the regular publication of projections for the future path of the policy rate, as with the Riksbank's publication of the repo rate path. It first discusses why publication of a projected interest-rate path represents a natural and desirable evolution of inflation-forecast targeting procedures, and the conditions under which the assumptions about future policy underlying such projections will be intertemporally consistent. It then discusses evidence on the extent to which central-bank statements influence private-sector interest-rate expectations. Particular attention is given to the potential use of forward guidance as an additional tool of policy when an executive lower bound for the policy rate is reached, and alternative approaches to forward guidance in this context are compared, including the recent adoption of quantitative "thresholds" for unemployment and inflation expectations by the U.S. ... The potential role of a nominal GDP level target within an inflation-targeting regime is also considered.
RePEc:cpr:ceprdp:9722 Save to MyIDEAS - Meixing Dai & Moise Sidiropoulos (2005): Should Inflation-Targeting Central Banks care about dynamic instabilities in an open economy
This paper studies the stability conditions in a simple dynamic economy model, in which central banks adopt an inflation-targeting regime to conduct their policy in a context of flexible exchange rates. We show that when inflation-targeting central banks place a low weight on their inflation target (a relatively high degree of inflation-targeting flexibility), the economy will have a saddle-point stationary equilibrium. In the opposite, when inflation-targeting central banks place a high weight on their inflation target (they have a relatively low degree of inflation-targeting flexibility), a stable equilibrium is impossible. Thus, inflation targeting will automatically give greater weight to exchange rate developments the more open is the economy. Responding too quickly to what may prove to be temporary exchange rate fluctuations, inflation-targeting central banks can set up dynamic instabilities.
RePEc:hal:journl:hal-00278706 Save to MyIDEAS - Meixing Dai & Moise Sidiropoulos (2005): Should inflation-targeting central banks care about dynamic instabilities in an open economy?
This paper studies the stability conditions in a simple dynamic economy model, in which central banks adopt an inflation-targeting regime to conduct their policy in a context of flexible exchange rates. We show that when inflation-targeting central banks place a low weight on their inflation target (a relatively high degree of inflation-targeting flexibility), the economy will have a saddle-point stationary equilibrium. In the opposite, when inflation-targeting central banks place a high weight on their inflation target (they have a relatively low degree of inflation-targeting flexibility), a stable equilibrium is impossible. Thus, inflation targeting will automatically give greater weight to exchange rate developments the more open is the economy. Responding too quickly to what may prove to be temporary exchange rate fluctuations, inflation-targeting central banks can set up dynamic instabilities.
RePEc:ekn:ekonom:v:8:y:2005:i:2:p:125-141 Save to MyIDEAS