## _wp08234 - 1. Inflation Targeters: Sample Characteristics

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### Sample and context
- Sample: five emerging market countries—Chile, the Czech Republic, Hungary, Poland, and Thailand—and the control country of Sweden; quarterly data from 2000 to 2005 (Hungary from 2001).
- Sample selection criteria: excluded large industrial and low-income countries, countries starting IT after 2001 or replacing IT, and countries without detailed inflation reports.
- Key sample averages and institutional features (2001–05):
  - Chile: Inflation target introduced 1991; Fully-fledged IT; Conditional forecasts; Inflation 2.6; CPI; Openness 69.1; GDP per capita 9,843.
  - Czech Republic: 1998; Fully-fledged; Conditional until mid-2002 then unconditional; Inflation 2.3; CPI; Openness 132.6; GDP per capita 17,010.
  - Hungary: 2001; Lite; Conditional on policy rates and exchange rates; Inflation 5.9; CPI; Openness 132.0; GDP per capita 14,858.
  - Poland: 1999; Lite; No reference to quantitative forecasts; Inflation 2.8; CPI; Openness 67.8; GDP per capita 11,676.
  - Sweden: 1993; Fully-fledged; Conditional; Inflation 1.5; CPI; Openness 84.7; GDP per capita 27,864.
  - Thailand: 2000; Fully-fledged; Conditional; Inflation 2.3; CPI and “core” inflation; Openness 131.2; GDP per capita 7,075.

### Conceptual framework and communication taxonomy
- Communication framework:
  - Based on inflation-forecast targeting and the idea that conditional inflation forecasts signal future policy actions.
  - Three-step public reconciliation process:
    1. Inspect inflation forecast vs target for implied policy direction.
    2. Observe actual policy rate changes and check consistency with forecast signal.
    3. Consult verbal assessments in inflation reports to clarify surprises or deviations.
- Decision-tree outcomes:
  - No-confusion outcomes when forecast, policy action, and verbal assessment align.
  - Confusion when forecasts, policy actions, and verbal assessments are mutually inconsistent.
- Verbal assessments:
  - Parsed from quarterly inflation reports; coded into supply/demand/external categories with +1/−1 signs; factors aggregated into an index-like annual average; verbal assessment threshold used: annual average > 0.5.

### Methodology and key parameterization
- Public’s policy-rule approximation (forward-looking Batini-Haldane (1999) style):
  - i_{t+1} = i_n + γ (i_t − i_n) + δ(π_{t+j}^{FCB} − π^*) with j = 4 (benchmark, 1-year-ahead) and robustness checks at j = 8 (2-year-ahead).
  - Benchmark calibration: γ = 0.3, δ = 2.0, real policy-neutral rate assumed 3 percent.
  - Robustness calibrations included γ = 0.5, δ = 3.0 and other alternatives.
  - Taylor-principle-like assumption: (1−γ)δ > 1.
- Implied forecast update:
  - Public computes rule-based forecast (π^{FP}) from observed policy-rate changes; implied forecast update = π^{FCB} − π^{FP}.
  - Non-zero difference indicates policymakers augmented staff forecasts with additional information.
- Verbal assessments coding:
  - Each verbal comment coded into supply/demand/external subcategories with sign +1 or −1; aggregated as annual average; threshold > 0.5 for meaningful verbal assessment.

### Empirical findings (benchmark: j = 4, γ = 0.3, δ = 2.0, real equilibrium rate = 3 percent)
- Overall accuracy and targets:
  - Central banks missed inflation targets in more than one-half of observations.
  - One-year inflation forecasts differed by at least 1 percentage point from target in 12 cases (one-third); of these, nine were below-target and three were above-target.
- Classification of 35 annual observations:
  - On-target forecast observations: 23 (65.7 percent).
  - Off-target forecast observations: 12 (34.3 percent).
  - No significant implied inflation risk signaled through policy rates (A1): 11 observations (31.4 percent).
  - Significant implied inflation risks (A2/B2): A2 = 12 observations (34.3 percent); B2 = 7 observations (20.0 percent).
  - Verbal assessments corresponding to implied risks: A21 = 11 observations (31.4 percent); B21 = 3 observations (8.6 percent).
  - Verbal assessments not corresponding (confusion): A22 = 1 observation (2.9 percent); B22 = 4 observations (11.4 percent).
- Clarity of communication (sample averages):
  - Consistent communication and no inflation outcome surprise: 22 observations (63 percent).
  - Consistent communication and inflation outcome surprise: 8 observations (23 percent).
  - Inconsistent communication: 5 observations (14 percent).
- Country-level clarity (percent of total observations, 2000–05):
  - Chile: consistent/no-surprise 50; consistent/surprise 33; inconsistent 17.
  - Czech Republic: 67; 17; 17.
  - Hungary: 40; 20; 40.
  - Poland: 67; 33; 0.
  - Sweden: 50; 50; 0.
  - Thailand: 50; 33; 17.
- Surprises and inconsistency:
  - About one in six policy decisions inconsistent in the one-year horizon.
  - About one-third of monetary policy decisions surprising—end-period inflation differed from forecast by more than 1 percentage point despite consistent communication.
- “Cried wolf” pattern and action-word mismatches:
  - 29 nonzero annual verbal assessments in 35 observations; 17 (three-fifths) pointed toward higher inflation.
  - Policy rates were lowered in 24 cases (two-thirds); in many cases words signaled pro-inflationary pressures while deeds loosened policy.
  - Sweden: policy rate changes aligned with verbal assessments but contradicted implied forecast updates in one-half of cases.
  - Czech 2004: policy rate increased by 50 basis points despite counter-inflationary pressures in implied and comprehensive risks.

### Robustness checks and sensitivity
- Robustness to alternative parameterizations and definitions:
  - Increasing δ from 2 to 5 halves the number of “inconsistent communication” observations.
  - Increasing γ from 0.3 to 0.5 nearly doubles the share of inconsistent communication.
  - Extending forecast horizon to 8 quarters produced a marginally higher share of inconsistent communication concentrated in Poland (sample size = 24).
  - Changing definition of observed inflation from period-end to period-average did not materially change results.
- Outcome classification across calibrations summarized in Figure 5: benchmark, more aggressive reaction, slower adjustment, lower real equilibrium rate, and emphasizing shocks; classifications into Clear; no surprise / Clear; surprise / Confusing showed qualitative stability.

### Country notes — highlights of communication, targets, and policy behavior
- Chile:
  - Targets: continuous range 2 percent to 4 percent, midpoint 3 percent, policy horizon 12–24 months.
  - Forecasts: model-based, conditional on unchanged interest rates; three-, seven-, and eight-quarter-ahead projections published.
  - Inflation: end-2000 peaked at 4.6 percent; in early 2004 briefly dipped below 0 percent.
- Czech Republic:
  - Transitioned from net inflation to headline CPI in 2002; six-quarter-ahead projections since mid-1999, extended to eight quarters in 2001.
  - Inflation mostly below target and outside the target band during the period.
- Hungary:
  - MNB introduced IT mid-2001; targets set for year-end with a ± 1-percent band; forecasts presented as fan charts with eight-quarter horizons.
  - Early period met targets comfortably; later volatility with inflation exceeding end-period targets in half of later observations.
- Poland:
  - “Lite” IT since 1999; forecasts partly model-based and conditional on unchanged interest rates; public forecasting information limited.
  - Disinflation faster than signaled by targets in first half of sample; policy rate declined to about 5 percent thereafter.
- Sweden:
  - Headline CPI target: 2 percent; forecasts conditional on unchanged interest rates (switch to unconditional forecasts occurred in 2007, after sample).
  - CPI grew to 3 percent in Q3 2001; remained above target until mid-2003 then moved below.
- Thailand:
  - BOT targets core inflation with horizontal range 0–3.5 percent; eight-quarter forecast horizon; policy rate rose sharply after 2004 amounting to 300 basis points.

### Conclusions and policy implications
- Main conclusions:
  - Inflation-targeting central banks in the sample largely communicated consistently; most missed targets could be understood from publicly available information (targets, forecasts, policy actions, verbal assessments).
  - Approximately one-seventh of monetary policy decisions were inconsistent within the one-year horizon; about one-third of decisions were surprising.
  - Supply shocks and uncertainty limited the ability to achieve perfect communication and forecasting; in environments of large uncertain supply shocks, transparency may not be uniformly beneficial.
- Suggested extensions and further research:
  - Expand communication categorization to include policymakers’ voting records and additional devices.
  - Broaden the sample to industrial countries and recent inflation-targeting adopters.
  - Explore alternative and asymmetric policy rules where responses to above-target and below-target forecasts differ.

*Source: _wp08234 - 1. Inflation Targeters: Sample Characteristics, PDF chapter/section.*

### 1. Inflation Targeters: Sample Characteristics.........................................................................1

### _wp08234 - 1. Inflation Targeters: Sample Characteristics.........................................................................1

### Sections (numbered)
- 1. Inflation Targeters: Sample Characteristics.........................................................................15
- 2. Breakdown of Communication Results, Sample Average, 2000–05...................................16
- 3. Clarity of Communication, Sample Averages, 2000–05 .....................................................17
- 4. Clarity of Communication, Individual Countries, 2000–05 ................................................18
- 5. Clarity of Communication, the 2–Year Forecast Horizon, 2000–05 ...................................21

### Figures
- Figure 1. Inflation and Its Determinants, 2000-05 ................................................................................5
- Figure 2. Inflation Forecasts, Policymaking, and Communication Under Conditional ........................8
- Figure 3. The Public’s Scrutiny of Central Bank Communication .....................................................11
- Figure 4. Monetary Policy Communication: 2000-05.........................................................................19
- Figure 5. Clarity of Communication: Robustness Checks ..................................................................20

*Source: _wp08234 - 1. Inflation Targeters: Sample Characteristics, PDF chapter/section.*

### References..............................................................................................................

### _wp08234 - References

### Why inflation targeting?
- Proliferation attributed to superior management of inflation expectations through keeping inflation closer to targets and efficient communication (Svensson, 1997; Woodford, 2005; Eusepi and Preston, 2007).
- Inflation reports, inflation targets, inflation forecasts, and verbal assessments are central communication tools under inflation targeting.
- Sample: five emerging market countries—Chile, the Czech Republic, Hungary, Poland, and Thailand—and the control country of Sweden; quarterly data from 2000 to 2005 (Hungary from 2001).
- Key empirical observations:
  - Inflation was more than one percentage point higher/lower than the target in more than one-half of all annual observations.
  - Inflation was mostly below the target during 2000–05.
  - Estimated output gaps were mostly negative in all countries except Sweden.
  - Central banks foresaw undershooting and lowered policy rates in 2002/2003 but either could not or decided not to fully offset shocks.

### Communication framework and public reconciliation
- Conceptual basis:
  - Inflation-forecast targeting and the idea that conditional inflation forecasts signal future policy actions (Bernanke and Woodford, 1997; Svensson, 1997).
  - Three-step public reconciliation: (i) inspect inflation forecast vs target for implied policy direction; (ii) observe actual policy rate changes and check consistency with forecast signal; (iii) consult verbal assessments in inflation reports to clarify surprises or deviations.
- Decision-tree outcomes:
  - No-confusion outcomes when forecast, policy action, and verbal assessment align (with possible surprises from shocks).
  - Confusion results when forecasts, policy actions, and verbal assessments are mutually inconsistent, preventing formation of meaningful inflation expectations.
- Verbal assessments:
  - Describe quantifiable or unquantifiable factors (labor market, global conditions) and often serve to augment or qualify model-based forecasts.
  - Are labor-intensive to collect and are coded qualitatively in the study into supply/demand/external categories with +1/–1 signs.

### Methodology
- Public’s policy rule approximation: forward-looking Batini-Haldane (1999) style rule where policy rate reacts to deviations of the inflation forecast from the target:
  - i_{t+1} = i_n + γ (i_t − i_n) + δ(π_{t+j}^{FCB} − π^*) with j = 4 (benchmark, 1-year-ahead) and robustness checks at j = 8 (2-year-ahead).
  - Benchmark parameter calibration: γ = 0.3, δ = 2.0, real policy-neutral rate assumed 3 percent (robustness also with γ = 0.5, δ = 3.0, and alternative calibrations).
  - Taylor-principle-like assumption: (1−γ)δ > 1.
- Implied forecast update:
  - The public computes a rule-based forecast (π^{FP}) from observed policy-rate changes; the implied forecast update is π^{FCB} − π^{FP}. A non-zero difference indicates policymakers augmented staff forecasts with additional information.
- Verbal assessments extraction:
  - Quarterly inflation reports parsed; each verbal comment coded into supply/demand/external subcategories and signed +1 or −1; factors aggregated into an index-like annual average. Factors given equal weight; verbal assessment threshold used in analysis: annual average > 0.5.

### Sample selection and data
- Selection criteria: excluded large industrial and low-income countries, countries starting IT after 2001 or replacing IT, and countries without detailed inflation reports.
- Final sample: Chile, the Czech Republic, Hungary, Poland, Thailand, and Sweden.
- Table 1 highlights (sample averages for 2001–05):
  - Chile: Inflation target introduced 1991; Fully-fledged IT; Conditional forecasts; Inflation 2.6; CPI; Openness 69.1; GDP per capita 9,843.
  - Czech Republic: 1998; Fully-fledged; Conditional until mid-2002 then unconditional; Inflation 2.3; CPI; Openness 132.6; GDP per capita 17,010.
  - Hungary: 2001; Lite; Conditional on policy rates and exchange rates; Inflation 5.9; CPI; Openness 132.0; GDP per capita 14,858.
  - Poland: 1999; Lite; No reference to quantitative forecasts; Inflation 2.8; CPI; Openness 67.8; GDP per capita 11,676.
  - Sweden: 1993; Fully-fledged; Conditional; Inflation 1.5; CPI; Openness 84.7; GDP per capita 27,864.
  - Thailand: 2000; Fully-fledged; Conditional; Inflation 2.3; CPI and “core” inflation; Openness 131.2; GDP per capita 7,075.

### Empirical findings
- Summary (4-quarter horizon, benchmark calibration γ = 0.3, δ = 2.0, real equilibrium rate = 3 percent; implied forecast updates used if ≥ 1 percentage point; verbal assessments used if annual average > 0.5):
  - Central banks missed inflation targets in more than one-half of observations.
  - One-year inflation forecasts differed by at least 1 percentage point from target in 12 cases (one-third); of these, nine were below-target and three were above-target.
  - Of total 35 annual observations:
    - On-target forecast observations: 23 (65.7 percent).
    - Off-target forecast observations: 12 (34.3 percent).
    - No significant implied inflation risk signaled through policy rates (A1): 11 observations (31.4 percent).
    - Significant implied inflation risks (A2/B2): 12 (34.3 percent for A2) and 7 (20.0 percent for B2) respectively.
    - Verbal assessments corresponded to implied risks: A21 = 11 observations (31.4 percent); B21 = 3 observations (8.6 percent).
    - Verbal assessments did not correspond (confusion): A22 = 1 observation (2.9 percent); B22 = 4 observations (11.4 percent).
  - Clarity of communication (sample averages):
    - Consistent communication and no inflation outcome surprise: 22 observations (63 percent).
    - Consistent communication and inflation outcome surprise: 8 observations (23 percent).
    - Inconsistent communication: 5 observations (14 percent).
  - Country-level clarity (percent of total observations, 2000–05):
    - Chile: consistent/no-surprise 50; consistent/surprise 33; inconsistent 17.
    - Czech Republic: 67; 17; 17.
    - Hungary: 40; 20; 40.
    - Poland: 67; 33; 0.
    - Sweden: 50; 50; 0.
    - Thailand: 50; 33; 17.
  - Surprises and inconsistency:
    - About one in six policy decisions inconsistent in the one-year horizon.
    - About one-third of monetary policy decisions surprising—end-period inflation differed from forecast by more than 1 percentage point despite consistent communication.
  - “Cried wolf” phenomenon:
    - 29 nonzero annual verbal assessments in 35 observations; 17 (three-fifths) pointed toward higher inflation.
    - Policy rates were lowered in 24 cases (two-thirds); in many cases words signaled pro-inflationary pressures while deeds loosened policy (example: Hungary loosened four times while verbal assessments indicated pro-inflationary pressures in three of those periods).
    - Sweden: policy rate changes aligned with verbal assessments but contradicted implied forecast updates in one-half of cases.
    - Czech 2004: policy rate increased by 50 basis points despite counter-inflationary pressures in implied and comprehensive risks.

### Robustness checks
- Results robust to:
  - Alternative policy-rule parameters. Example impacts:
    - Increasing δ from 2 to 5 halves the number of “inconsistent communication” observations.
    - Increasing γ from 0.3 to 0.5 nearly doubles the share of inconsistent communication.
  - Extending forecast horizon to 8 quarters produced a marginally higher share of inconsistent communication concentrated in Poland (Table 5, sample size = 24).
  - Changing definition of observed inflation from period-end to period-average did not materially change results.
- Figure 5 summary (outcome distributions across calibrations): benchmark, more aggressive reaction, slower adjustment, lower real equilibrium rate, or emphasizing shocks; classification into Clear; no surprise / Clear; surprise / Confusing.

### Conclusions and policy implications
- Main conclusions:
  - Inflation-targeting central banks in the sample largely communicated consistently; most missed targets could be understood from publicly available information (targets, forecasts, policy actions, verbal assessments).
  - Approximately one-seventh of monetary policy decisions were inconsistent within the one-year horizon; about one-third of decisions were surprising.
  - Supply shocks and uncertainty during the sample period limited the ability to achieve perfect communication and forecasting; in environments of large uncertain supply shocks, transparency may not be uniformly beneficial.
- Suggested extensions and implications for policy and research:
  - Expand categorization of communication tools to include policymakers’ voting records and additional devices.
  - Broaden the sample to industrial countries and recent inflation-targeting adopters.
  - Explore alternative and asymmetric policy rules where responses to above-target and below-target forecasts differ.

*Source: Authors’ calculations and analysis in the provided content.*

### References

### _wp08234 - References

### Major literature cited
- The references list extensive literature on inflation targeting, central bank communication, and monetary policy frameworks, including working papers, journal articles, conference remarks, and central bank reports.
- Notable recurring themes in the literature:
  - Forward-looking monetary policy rules and inflation forecasts (e.g., Batini and Haldane, 1999; Bernanke and Woodford, 1997; Svensson, 1997).
  - Central bank communication and transparency (e.g., Blinder and others, 2001; Woodford, 2005; Rozkrut and others, 2007).
  - Experiences of emerging markets and transition economies with inflation targeting (e.g., Batini and Laxton, 2007; Jonáš and Mishkin, 2003; Mishkin and Schmidt-Hebbel, 2007).
  - Empirical assessments of inflation targeting outcomes, credibility, and output volatility (e.g., Cecchetti and Ehrmann, 1999; Roger and Stone, 2005; Carare and Stone, 2003).
- Country- and central bank-specific studies and reports are cited for empirical evidence and policy practice (examples include Banco Central do Brasil, Banco Central de Chile, Czech National Bank, Magyar Nemzeti Bank, Narodowy Bank Polski).

### Chile: Country Note — key findings and policy features
- Basic information about the IT regime:
  - Transition toward inflation targeting started in 1990 in the context of a crawling exchange rate regime, with inflation of about 20 percent.
  - The currency, the peso, was floated only in 1999 and the central bank moved toward a full-fledged regime at that time.
  - The mandate of the Banco Central de Chile (CBC) presently covers price stability only.
  - The CBC sets its own inflation target and maintains instrument independence.
  - Foreign exchange interventions have been rare despite “fear of floating.”
  - Four-monthly Monetary Policy Reports provide information on inflation forecasts.
- Inflation targets and forecasts:
  - The CBC targets headline inflation.
  - Continuous target range: from 2 percent to 4 percent, with a midpoint of 3 percent and a policy horizon of 12–24 months.
  - CBC’s inflation forecasts are based on a publicly available model and inflation reports closely follow the model structure.
  - Decision-making relies on conditional forecasts based on unchanged interest rates.
  - The central bank has published three-, seven-, and eight-quarter-ahead projections.
- Inflation record and monetary policy:
  - For most of the period inflation was rarely outside of the target range.
  - End-2000 inflation peaked at 4.6 percent and in early 2004 it briefly dipped below 0 percent.
  - The policy rate was on a downward sloping path until 2004, with the exception of a technical increase in 2000.
  - Since 2004 rates have been increasing gradually, returning to their 2000 level.
  - The peso has been comparatively stable in real effective terms, except during 2002–2003 when the currency weakened.
  - External shocks dominated the beginning of the sample period; domestic demand shocks dominated in the second half.
- Notes and figures:
  - Figure 1. Chile: Inflation Developments, 2000-06 — Definitions: Inflation projections are those announced in the first quarterly IT report of each year. Real interest rate(t) = Interest rate(t) - CPI(t).
  - Technical note: In mid-2000 the central bank changed its policy instrument, resulting in a technical increase of about 300 basis points. Effectively, the policy stance remained unchanged at that time.

### The Czech Republic: Country Note — key findings and policy features
- Basic information about the IT regime:
  - CNB introduced inflation targeting in December 1997 following the collapse of the koruna peg earlier in the year.
  - CNB mandate covers price stability only.
  - CNB sets its own inflation target, maintains instrument independence, and is not allowed to finance government deficits.
  - Currency is freely floating, with rarely used foreign exchange interventions.
  - Model-based inflation forecasts provide a basis for policy communication (Šmídková and Bulíř, 2007).
- Inflation targets and forecasts:
  - Initially targeted “net inflation” (CPI minus regulated prices and the impact of indirect taxes and subsidies), switched to headline inflation (CPI) in 2002.
  - Inflation Reports became more model-based over time; initially relied on conditional forecasts based on unchanged interest rates.
  - Developed a full-fledged forecasting system; in 2002/03 switched to an advanced forecasting system underpinned by a calibrated output-gap model employing unconditional forecasts; moved toward a dynamic general equilibrium model in 2008.
  - Since mid-1999, CNB published six-quarter-ahead quarterly projections; extended to eight quarters in 2001.
- Inflation record and monetary policy:
  - For most of the period inflation was below target and outside of the target band.
  - CNB cited external and/or exogenous shocks as reasons for undershooting and used pre-announced escape clauses for some shock factors.
  - Policy interest rate (two-week repo rate) was mostly on a downward sloping path during the analyzed period.
  - Koruna recovered quickly from its 1997–98 low and the real exchange rate mostly fluctuated narrowly around its long-term appreciation trend.
- Notes and figures:
  - Figure 1. The Czech Republic: Inflation Developments, 2000-06 — Definitions: Inflation projections are those announced in the first quarterly IT report of each year. Real interest rate(t) = Interest rate(t) - CPI(t).
  - Footnote: End-year inflation targets for 2001 and 2002 were set for net inflation that is not directly comparable to headline inflation.

### Hungary: Country Note — key findings and policy features
- Basic information about the IT regime:
  - Magyar Nemzeti Bank (MNB) introduced inflation targeting in mid-2001 while widening and eventually abolishing the forint crawling peg.
  - Price stability is the prime objective of the MNB and inflation targets are decided jointly between the Bank and the government.
  - MNB maintains instrument independence.
  - MNB initially emphasized exchange rate stability because of fast pass-through from exchange rate to domestic prices.
  - The forint exchange rate fluctuated until February 2008 within a ± 15 percent, ERM2-like band, with a pre-announced central parity defended, if necessary, by interventions.
- Inflation targets and forecasts:
  - MNB targets headline inflation with no pre-announced exemptions.
  - Targets are set for the year-end only, with a ± 1-percent band.
  - Targets initially demarcated a disinflation path, then stabilized around 3 percent.
  - Inflation Reports use fan charts showing eight-quarter inflation forecasts with model-based estimates of uncertainty.
  - Forecasts are conditional on unchanged interest and exchange rates during the forecasting period.
- Inflation record and monetary policy:
  - In the first half of the period the MNB met targets comfortably.
  - Later, inflation became volatile, exceeding end-period targets in half of the remaining observations.
  - Policy interest rate (two-week central bank deposit rate) declined in line with inflation during 1999–2002 and became volatile thereafter.
  - Policy deliberations were dominated by domestic demand considerations, public wage growth, and exchange rate volatility.
  - The forint was comparatively strong vis-à-vis its trend but more volatile than in other countries.
- Notes and figures:
  - Figure 1. Hungary: Inflation Developments, 2000-06 — Definitions: Inflation projections are those announced in the first quarterly IT report of each year. Real interest rate(t) = Interest rate(t) - CPI(t).

### Poland: Country Note — key findings and policy features
- Basic information about the IT regime:
  - Poland introduced inflation targeting in 1999 and operated an inflation-targeting “lite” regime during the sample period.
  - The Narodowy Bank Polski (NBP) mandate covers price stability only.
  - NBP sets its own inflation target and maintains instrument independence.
  - A pure floating exchange rate was introduced in April 2000, following a 10-year period during which the exchange rate served as a nominal anchor.
- Inflation targets and forecasts:
  - Initially, end-period inflation targets signaled disinflation goals; from 2004 NBP began targeting a horizontal band.
  - Targets have been defined for the broad consumer price index.
  - Historically, NBP published comparatively little information about the formalities of its forecasting regime and inflation forecasts per se.
  - During 2000–05 forecasts were only partly model-based, relying on conditional forecasts based on unchanged interest rates.
  - Forecasting was supported by expert forecasts and single-equation models.
  - The publicly announced forecast was initially for five quarters; in 2002 extended to seven quarters.
- Inflation record and monetary policy:
  - Disinflation process was faster than signaled by the inflation targets; inflation was below targeted path in the first half of the sample.
  - In the second half, inflation was more volatile, fluctuating above and below the target band.
  - Shocks described were both inflationary and deflationary; external and supply-side shocks were used to explain target undershooting.
  - Policy interest rates (the 28-day NBP bill rate) remained relatively high in 2000–01 and declined to about 5 percent thereafter.
  - Real exchange rate was comparatively volatile throughout the sample period.

*Italic: Content derived from _wp08234 - References (source PDF).*

### References

### References

### Poland — References and Key Inflation Figures
- Hornok, Cecília, and Zoltán M. Jakab, 2002, “Forecasting Inflation – A Case Study on the Czech, Hungarian, Polish, Slovakian and Slovenian Central Banks,” MNB Background Studies 2002/2 (Budapest: Magyar Nemzeti Bank).
- Narodowy Bank Polski, Inflation Reports (1998–2006).
- Narodowy Bank Polski, Monetary Policy Strategy Beyond 2003.
- Stone, Mark R., 2003, “Inflation Targeting Lite,” IMF Working Paper, No. 03/12 (Washington: International Monetary Fund).

Poland: Inflation and policy indicators (2000–06) — definitions and notable metrics
- Inflation projections: those announced in the first quarterly IT report of each year.
- Real interest rate(t) = Interest rate(t) - CPI(t).
- Figure highlights (2000q1–2006q1):
  - Target band and CPI displayed from 2000q1 through 2006q1 (In percent).
  - Policy rate, CPI, and "Real" interest rate plotted (In percent).
  - Regression shown: y = 1.5013x + 3.6025; R^2 = 0.8005.

Poland: Inflation factors (1999–2006) — definitions and indicators
- Definitions:
  - Gap = seasonally adjusted GDP - Hodrick-Prescott filtered GDP.
  - REER gap = REER (1999=100) - Hodrick-Prescott filtered REER.
  - Impulse = overall balance (t) - overall balance (t-1).
  - Seasonal adjustment: X-12 procedure.
- Series included:
  - GDP annualized q-on-q growth, seasonally adjusted (In percent), 1999q1–2006q1.
  - Year-on-year growth and GDP gap (In percent).
  - Fiscal balances: Impulse and Primary balance (In percent of GDP), 1999–2006.
  - Verbal assessments: counts of Net external environment, Net aggregate supply, Net aggregate demand (2000q1–2005q1).

### Sweden — Country Note, References, and Key Figures
- Basic information about the IT regime:
  - Riksbank introduced inflation targeting in 1993.
  - Mandate covers price stability only.
  - Sets its own target for CPI, maintains instrument independence, and is not allowed to finance government deficits.
  - Currency: floating; foreign exchange interventions rare.
  - Explicit goal: make Riksbank’s deliberations known to a wider public to ease understanding and followability of monetary policy.
- Inflation targets and forecasts:
  - Headline CPI target: 2 percent, with no band specified.
  - Forecasts and reports were based on and followed the publicly available model.
  - Decision-making used conditional forecasts of unchanged interest rates; starting in 2005 forecasts incorporated market expectations about policy interest rates.
  - The Riksbank published a complete set of two-year-ahead quarterly projections.
  - Note: In 2007, after the sample ended, the Riksbank switched from conditional to unconditional forecasts.
- Inflation record and monetary policy:
  - CPI grew from nil to 3 percent in the third quarter of 2001; remained above target until mid-2003 and moved below afterward.
  - Riksbank viewed long-term inflation outlook as broadly balanced with high uncertainty and a volatile external environment.
  - Deflationary external and supply-side shocks later outweighed domestic demand inflationary pressures, except in the last couple of quarters when inflationary pressures revived.
  - Riksbank repeatedly applied escape clauses, e.g., to account for the decline in oil prices in early 2003.
  - Policy interest rates: stable around 4 percent until 2002 and declining afterward.
  - The krona was relatively weak in real terms compared to the long-term trend, except briefly in 2002–03.

Sweden — References
- Giavazzi, Francesco, and Frederic Mishkin, 2006, “An Evaluation of Swedish Monetary Policy 1995–2005,” Report for the Riksbank.
- Heikensten, Lars, and Anders Borg, 2002, “The Riksbank’s Foreign Exchange Interventions – Preparations, Decision and Communication,” Economic Review, 1/2002.
- Riksbank, Inflation Reports (1993–2006).

Sweden: Inflation and policy indicators (2000–06) — definitions and notable metrics
- Inflation projections: those announced in the first quarterly IT report of each year.
- Real interest rate(t) = Interest rate(t) - CPI(t).
- Figure highlights (2000q1–2006q1):
  - Target and CPI series (In percent) showing values between -2 and 4 percent across quarters.
  - Policy rate, CPI, and "Real" interest rate plotted (In percent) with values between -1 and 5 percent.
  - Regression shown: y = 0.6907x + 2.1423; R^2 = 0.4438.

Sweden: Inflation factors (1999–2006) — definitions and indicators
- Definitions:
  - Gap = seasonally adjusted GDP - Hodrick-Prescott filtered GDP.
  - REER gap = REER (1999=100) - Hodrick-Prescott filtered REER.
  - Impulse = overall balance (t) - overall balance (t-1).
  - Seasonal adjustment: X-12 procedure.
- Series included:
  - GDP annualized q-on-q growth, seasonally adjusted (In percent), 1999q1–2006q1.
  - Year-on-year growth and GDP gap (In percent).
  - Fiscal balances: Impulse and Primary balance (In percent of GDP), 1999–2006.
  - Verbal assessments: counts of Net external environment, Net aggregate supply, Net aggregate demand (2000q1–2005q1).

### Thailand — Country Note, References, and Key Figures
- Basic information about the IT regime:
  - Bank of Thailand (BOT) introduced inflation targeting in 2000.
  - BOT mandate: maintain domestic and external stability.
  - BOT sets its own inflation target and maintains instrument independence.
  - Exchange rate regime: managed-float, adopted in 1997; BOT intervenes to prevent excessive volatility.
  - Model-based inflation forecasts provide a basis for monetary policy decisions; GDP fan charts are used as communication tools.
- Inflation targets and forecasts:
  - BOT targets core inflation, excluding highly volatile items such as rice and gasoline.
  - Target: horizontal 0–3.5 percent range — the widest band in the sample of inflation-targeting countries.
  - Inflation reports are model-based; forecast assumptions, outcomes, and the forecasting model are made public.
  - Forecast horizon: eight quarters.
- Inflation record and monetary policy:
  - For most of the period core inflation was below the mid-point of the target range; toward the end of the sample core inflation picked up but remained inside the range.
  - The pickup in inflation was explained mostly by external and supply-side factors.
  - Policy interest rates (the 1-day repurchase rate) were stable until 2004 and increased sharply thereafter in response to inflationary pressures.
  - The increase amounted to 300 basis points — among the highest in the sample.
  - The Thai baht remained below its long-term real trend during the whole period, presumably as a result of the managed-float strategy.

Thailand — References
- Bank for International Settlements, 2005, “Foreign Exchange Market Intervention in Emerging Markets: Motives, Techniques and Implications.” BIS Papers, No. 24.
- BOT, Inflation Reports (2000–2006).
- BOT, The Bank of Thailand’s Macroeconomic Model for Inflation Targeting.

Thailand: Inflation and policy indicators (2000–06) — definitions and notable metrics
- Inflation projections: those announced in the first quarterly IT report of each year.
- Real interest rate(t) = Policy rate(t) - CPI(t).
- Figure highlights (2000q1–2006q1):
  - Core inflation and core inflation target band (0-3.5%) plotted (In percent).
  - Policy rate, CPI, and "Real" interest rate plotted (In percent), with regression: y = 0.4746x + 1.1073; R^2 = 0.4058.
  - GDP annualized q-on-q growth, seasonally adjusted (In percent) shown for 1999q1–2006q1 with values spanning negative and positive growth rates.
  - Fiscal impulse and primary balance (In percent of GDP), 1999–2006.
  - Verbal assessments: counts of Net external environment, Net aggregate supply, Net aggregate demand (2000q1–2005q1).

*Source: _wp08234 - References*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2008/_wp08234.pdf_