Inflation Targeting and Communication: It Pays Off to Read Inflation Reports
IMF Working Papers, October 1, 2008
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- Inflation Targeting and Communication: It Pays Off to Read Inflation Reports
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Bibliographic details
- Authors: Katerina Smídková, Viktor Kotlán, David Navrátil
- Published: October 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870923.001
Summary
- Inflation-targeting central banks have a respectable track record at explaining their policy actions and corresponding inflation outturns.
- The paper presents a new methodology for the empirical evaluation of consistency in central bank communication using:
- a simple forward-looking policy rule, and
- an assessment of inflation reports.
- Main empirical finding: the three communication tools—inflation targets, inflation forecasts, and verbal assessments of inflation factors contained in quarterly inflation reports—provided a consistent message in five out of six observations in the 2000-05 sample.
Methodology
- Uses a simple forward-looking policy rule to link communication to policy actions.
- Assesses consistency across three communication tools:
- inflation targets,
- inflation forecasts, and
- verbal assessments of inflation factors in quarterly inflation reports.
Sample and Data
- Sample period: 2000-05.
- Countries analyzed: Chile, the Czech Republic, Hungary, Poland, Thailand, and Sweden.
- Publication details:
- Pages: 42
- Volume: 2008
- Issue: 234
- Series: Working Paper No. 2008/234
- DOI: https://doi.org/10.5089/9781451870923.001
- Stock No: WPIEA2008234
- ISBN: 9781451870923
- ISSN: 1018-5941
Key Findings
- Communication consistency: three communication tools aligned in five out of six country observations in the 2000-05 sample.
- Reinforces that inflation-targeting frameworks can effectively explain policy actions and inflation outcomes when communication is consistent across targets, forecasts, and report narratives.
Subjects and Keywords
- Subject: Central bank policy rate, Communications in revenue administration, Economic forecasting, Inflation, Inflation targeting
- Keywords: inflation factor, inflation forecast, inflation report, inflation target, WP
Source: IMF Working Paper No. 2008/234 (DOI: https://doi.org/10.5089/9781451870923.001).