Disagreement about Future Inflation: Understanding the Benefits of Inflation Targeting and Transparency

By Steve Brito, Yan Carriere-Swallow, Bertrand Gruss

January 25, 2018

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Steve Brito, Yan Carriere-Swallow, and Bertrand Gruss. Disagreement about Future Inflation: Understanding the Benefits of Inflation Targeting and Transparency, (USA: International Monetary Fund, 2018) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We estimate the determinants of disagreement about future inflation in a large and diverse sample of countries, focusing on the role of monetary policy frameworks. We offer novel insights that allow us to reconcile mixed findings in the literature on the benefits of inflation targeting regimes and central bank transparency. The reduction in disagreement that follows the adoption of inflation targeting is entirely due to increased central bank transparency. Since the benefits of increased transparency are non-linear, the gains from inflation targeting adoption have accrued mainly to countries that started from a low level of transparency. These have tended to be developing countries.

Subject: Central bank transparency, Central banks, Inflation, Inflation targeting, Monetary policy, Prices

Keywords: Adoption episode, Adoption of an IT regime, Central bank transparency, Global, Inflation, Inflation expectation, Inflation forecasts, Inflation targeting, IT adoption, IT adoption episode, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/024
Stock No:

WPIEA2018024
ISBN:

9781484339718
ISSN:

1018-5941

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