Greater Monetary Policy Transparency for the G3: Lessons From Full-Fledged Inflation Targeters
IMF Working Papers, November 1, 2003
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- Greater Monetary Policy Transparency for the G3: Lessons From Full-Fledged Inflation Targeters
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Bibliographic details
- Authors: Mark R. Stone
- Published: November 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451875164.001
Summary and central finding
- The experience of full-fledged inflation targeting (FFIT) countries is used to shed light on the costs and benefits of greater monetary policy transparency for the G3.
- In practice, the G3 are already moving toward a new monetary regime that resembles FFIT in transparency, but not in accountability.
Costs and benefits by economy
- United States
- Hypothetical adoption of FFIT would incur a cost of less discretion.
- Would gain the benefit of locking in a highly credible framework.
- Euro area
- Hypothetical adoption of FFIT would incur a cost of less discretion.
- Would gain the benefit of locking in a highly credible framework.
- Japan
- Adoption of FFIT would create the risk of a further hit to credibility if policy was not able to end deflation.
Policy implications and interpretation
- Greater transparency modeled on FFIT can increase credibility by locking in a framework, at the expense of reduced discretionary flexibility.
- The balance of costs and benefits differs across the G3: the United States and the euro area would primarily trade discretion for credibility, whereas Japan faces the additional risk that adopting FFIT could worsen credibility if deflation persists.
- The current trajectory of the G3 is toward FFIT-like transparency without corresponding accountability mechanisms.
Keywords and subject areas covered
- Subject: Banking, Deflation, Inflation, Inflation targeting, Monetary policy, Monetary policy transparency, Price stabilization, Prices
- Keywords: central bank, Deflation, EIT country, FFIT regime, Full-fledged inflation targeting, government, government website, IFFIT country, Inflation, inflation rate, inflation targeting, liquidity trap, monetary policy, monetary policy framework, Monetary policy transparency, Price stabilization, WP
Publication and document specifics
- Pages: 27
- Volume: 2003
- DOI: https://doi.org/10.5089/9781451875164.001
- Issue: 218
- Series: Working Paper No. 2003/218
- Stock No: WPIEA2182003
- ISBN: 9781451875164
- ISSN: 1018-5941
- Author: Mark R. Stone
- Date: November 1, 2003
- Note: "This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate."
Source: "Greater Monetary Policy Transparency for the G3: Lessons From Full-Fledged Inflation Targeters", IMF Working Papers 2003, 218 (2003), by Mark R. Stone.