Inflation Forecast or Forecast(s) Targeting?

Karolina Tura-Gawron ()

Journal for Economic Forecasting, 2018, issue 3, 42-56

Abstract: The paper refers to L.E.O. Svensson’s concept of inflation forecast targeting (IFT) and its implementation by central banks of Sweden, Norway and the Czech Republic. The study focuses on (1) inflation forecasts published by selected central banks, i.e. headline inflation and core or monetary policy-relevant (MPR) inflation, which are made on the assumption of endogenous instrument rate, (2) one-year consumer inflation expectations, and (3) repo rate decisions. The aim of the paper is to investigate whether MPR and core inflation forecasts (in addition to headline inflation forecasts) are useful tools in implementing IFT. The authors take into consideration differences between forecasts deviations from the inflation target, dependencies between forecasts and consumer inflation expectations and relationships between repo rate decisions and forecasts. The methodology used includes nonparametric tests and statistics (Sign Test, Wilcoxon Matched Pair Test, Nonparametric Correlation coefficients) and forecast errors analysis. The results are sufficiently positive to conclude that the implementation of IFT in central banking practice should be supplemented by forecasts of core inflation. The paper contributes to the literature on implementing monetary policy under the concept of IFT. It spotlights the importance of publication of core inflation forecasts that are not captured by other research undertakings, which tend to ignore the existence of them as such.

Keywords: inflation forecast; inflation targeting regime; inflation forecast targeting; monetary policy; inflation expectations (search for similar items in EconPapers)
JEL-codes: E52 E58 E59 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ipe.ro/rjef/rjef3_18/rjef3_2018p42-56.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2018:i:3:p:42-56

Access Statistics for this article

Journal for Economic Forecasting is currently edited by Lucian Liviu Albu and Corina Saman

More articles in Journal for Economic Forecasting from Institute for Economic Forecasting Contact information at EDIRC.
Bibliographic data for series maintained by Corina Saman ( this e-mail address is bad, please contact ).