Do inflation targets anchor inflation expectations?

Christian Pierdzioch and Jan-Christoph Rülke

Economic Modelling, 2013, vol. 35, issue C, 214-223

Abstract: We suggest a simple test of whether an inflation target anchors private-sector inflation expectations. The test is easy to compute and it is robust to various sources of misspecification. The test may be a useful alternative to dispersion measures commonly studied in research on inflation targeting. Using data for 22 inflation targeting countries, we find for many countries that the forecasters scatter their inflation forecasts away from the inflation target. We account for the endogeneity of inflation targets, we study the variability of our finding across countries and across time, and we study to which extent our results depend on the level and variability of inflation targets.

Keywords: Inflation targeting; Forecasting; Anchoring (search for similar items in EconPapers)
JEL-codes: E47 E52 E58 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:214-223

DOI: 10.1016/j.econmod.2013.06.042

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