Inflation-Forecast Targeting: Applying the Principle of Transparency

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

No 2015/132, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; rate of inflation; reaction function; transmission mechanism; fed funds rate; Inflation Targeting; Monetary Policy; Optimal Control; price level; interest rate path; nominal interest rate; exchange rate; Inflation; Central bank policy rate; Output gap; Real interest rates; Global (search for similar items in EconPapers)
Pages: 56
Date: 2015-06-24
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Citations: View citations in EconPapers (16)

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