Inflation Targeting Flexibility: The CNB's Reaction Function under Scrutiny
Jan Filáček and
Research and Policy Notes from Czech National Bank
This note deals with the issue of inflation targeting flexibility from the perspective of the Czech National Bank and other relevant central banks. We discuss possible ways of increasing the flexibility of the CNB's monetary policy, namely narrowing the targeted and communicated measure of inflation, prolonging the policy horizon, lowering the aggressivity of the rule to deviations of expected inflation from the target, increasing the smoothing of interest rates and responding to real economic developments. Our simulations show that these adjustments in the CNB's reaction function would slightly improve the stability of real output, while at the same time leading to large costs in terms of less stable and less anchored inflation.
Keywords: Inflation targeting flexibility; monetary policy rules; optimal reaction function (search for similar items in EconPapers)
JEL-codes: C32 E37 E47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.cnb.cz/export/sites/cnb/en/economic-re ... nload/rpn_2_2019.pdf
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cnb:rpnrpn:2019/02
Access Statistics for this paper
More papers in Research and Policy Notes from Czech National Bank Contact information at EDIRC.
Bibliographic data for series maintained by Jan Babecky ().