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

    Tas, B.K.O. 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.

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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.

    Metadata

    Item Type: Article
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 24 Nov 2014 10:42
    Last Modified: 11 Oct 2016 11:59
    URI: http://eprints.bbk.ac.uk/id/eprint/11088

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