Setting the Operational Framework for Producing Inflation Forecasts

By Turgut Kisinbay, Eric Parrado, Rodolfo Maino, Jorge I Canales Kriljenko

May 1, 2006

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Turgut Kisinbay, Eric Parrado, Rodolfo Maino, and Jorge I Canales Kriljenko. Setting the Operational Framework for Producing Inflation Forecasts, (USA: International Monetary Fund, 2006) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Banking, Central bank policy rate, Economic forecasting, Inflation, Inflation targeting

Keywords: Central bank authority, Forecasting framework, Monetary policy committee, Policy reaction function, Transmission mechanism, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/122
Stock No:

WPIEA2006122
ISBN:

9781451863826
ISSN:

1018-5941

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