Inflation Targeting and Communication: It Pays Off to Read Inflation Reports

By Katerina Smídková, Viktor Kotlán, David Navrátil, Ales Bulir

October 1, 2008

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Format: Chicago

Katerina Smídková, Viktor Kotlán, David Navrátil, and Ales Bulir. Inflation Targeting and Communication: It Pays Off to Read Inflation Reports, (USA: International Monetary Fund, 2008) 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

Inflation-targeting central banks have a respectable track record at explaining their policy actions and corresponding inflation outturns. Using a simple forward-looking policy rule and an assessment of inflation reports, we provide a new methodology for the empirical evaluation of consistency in central bank communication. We find that the three communication tools-inflation targets, inflation forecasts, and verbal assessments of inflation factors contained in quarterly inflation reports-provided a consistent message in five out of six observations in our 2000-05 sample of Chile, the Czech Republic, Hungary, Poland, Thailand, and Sweden.

Subject: Central bank policy rate, Communications in revenue administration, Economic forecasting, Inflation, Inflation targeting

Keywords: Inflation factor, Inflation forecast, Inflation report, Inflation target, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/234
Stock No:

WPIEA2008234
ISBN:

9781451870923
ISSN:

1018-5941

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