Inflation-Forecast Targeting: Applying the Principle of Transparency

By Kevin Clinton, Charles Freedman, Michel Juillard, Ondrej Kamenik, Douglas Laxton, Hou Wang

June 24, 2015

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Kevin Clinton, Charles Freedman, Michel Juillard, Ondrej Kamenik, Douglas Laxton, and Hou Wang. Inflation-Forecast Targeting: Applying the Principle of Transparency, (USA: International Monetary Fund, 2015) accessed December 3, 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

Many central banks in emerging and advanced economies have adopted an inflation-forecast targeting (IFT) approach to monetary policy, in order to successfully establish a stable, low-inflation environment. To support policy making, each has developed a structured system of forecasting and policy analysis appropriate to its needs. A common component is a model-based forecast with an endogenous policy interest rate path. The approach is characterized, among other things, by transparent communications—some IFT central banks go so far as to publish their policy interest rate projection. Some elements of this regime, although a work still in progress, are worthy of consideration by central banks that have not yet officially adopted full-fledged inflation targeting.

Subject: Banking, Central bank policy rate, Financial services, Inflation, Inflation targeting, Monetary policy, Output gap, Prices, Production, Real interest rates

Keywords: Central bank policy rate, Exchange rate, Fed funds rate, Global, Inflation, Inflation Targeting, Interest rate path, Monetary Policy, Nominal interest rate, Optimal Control, Output gap, Price level, Rate of inflation, Reaction function, Real interest rates, Transmission mechanism, WP

Publication Details

Pages:

56
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/132
Stock No:

WPIEA2015132
ISBN:

9781513557656
ISSN:

1018-5941

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