Inflation Targeting: What is the Meaning of the Bottom of the Band?
December 1, 1999
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Summary
This paper investigates the meaning of the bottom of target bands in inflation targeting regimes. It is argued that the design of lower limits on target bands, if not done with care, can lead to a lack of transparency, potentially confusing markets about how the authorities will react to a fall in inflation. After first discussing the conceptual issues, the paper then examines the experience with target bands in New Zealand, Israel and Canada and explores how the conceptual issues have played out in practice.
Subject: Banking, Disinflation, Inflation, Inflation targeting, Monetary policy, Price stabilization, Prices
Keywords: A. General regime design, credibility, Disinflation, government, Inflation, inflation rate, inflation target, inflation target band, Inflation targeting, inflation targeting experience, inflation targeting framework, IT framework, IT literature, monetary policy, PDP, Price stabilization, target band
Pages:
24
Volume:
1999
DOI:
Issue:
008
Series:
Policy Discussion Paper No. 1999/008
Stock No:
PPIEA0081999
ISBN:
9781451970906
ISSN:
1564-5193
