Keep your word: Time-varying inflation targets and inflation targeting performance

Tas, Bedri Kamil Onur and Demir, Ishak (2014) Keep your word: Time-varying inflation targets and inflation targeting performance. The Manchester School, 82 (2). pp. 160-182. ISSN 1463-6786

Full content URL: http://dx.doi.org/10.1111/manc.12005

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Abstract

This paper investigates the implicit inflation targets of inflation targeting (IT) central banks (CBs). The implicit (perceived) inflation targets of IT CBs derived from their actions (policy interest rates) are calculated before and after IT adoption. We conclude that after adoption of IT implicit targets become significantly lower. Other factors that cause CBs to change their implicit targets are inflation, exchange rate and trade balance. Finally, we find that CBs that do not follow their announced targets miss their inflation targets. The results indicate that IT CBs should follow their announced targets when setting policy interest rates

Keywords:inflation targeting, central banking, monetary policy, implicit inflation target, inflation, NotOAChecked
Subjects:L Social studies > L100 Economics
L Social studies > L113 Economic Policy
L Social studies > L130 Macroeconomics
Divisions:College of Social Science
Lincoln International Business School
ID Code:28085
Deposited On:02 Aug 2017 15:13

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