IMF Working Papers

Setting the Operational Framework for Producing Inflation Forecasts

Author/Editor:

Turgut Kisinbay ; Eric Parrado ; Rodolfo Maino ; Jorge I Canales Kriljenko

Publication Date:

May 1, 2006

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

How should a central bank organize itself to produce the best possible inflation forecast? This paper discusses elements for building a comprehensive platform for an inflation forecasting framework. It describes the exercise of forecasting inflation as a production process, which induces a strict discipline concerning data management, information gathering, the use of a suitable statistical apparatus, and the exercise of sound communication strategies to reinforce reputation and credibility. It becomes critical how a central bank organizes itself to produce relevant macroeconomic forecasts, with special consideration to product design, the essential requirements needed in the forecasting process, and key related organizational issues. In addition, the paper proposes to factor into the process the authorities' policy responses to previous inflation forecasts in order to be consistent with the spirit of the inflation targeting framework.

Series:

Working Paper No. 06/122

Subject:

Central bank organization Central bank policy Central banks and their policies Data analysis Data collection Forecasting models Inflation Inflation targeting Monetary policy