Disagreement about Future Inflation: Understanding the Benefits of Inflation Targeting and Transparency

Steve Brito, Yan Carrière-Swallow and Bertrand Gruss

No 2018/024, IMF Working Papers from International Monetary Fund

Abstract: We estimate the determinants of disagreement about future inflation in a large and diverse sample of countries, focusing on the role of monetary policy frameworks. We offer novel insights that allow us to reconcile mixed findings in the literature on the benefits of inflation targeting regimes and central bank transparency. The reduction in disagreement that follows the adoption of inflation targeting is entirely due to increased central bank transparency. Since the benefits of increased transparency are non-linear, the gains from inflation targeting adoption have accrued mainly to countries that started from a low level of transparency. These have tended to be developing countries.

Keywords: WP; IT adoption; Inflation targeting; central bank transparency; inflation forecasts; adoption episode; inflation expectation; adoption of an IT regime; IT adoption episode; Inflation; Global (search for similar items in EconPapers)
Pages: 18
Date: 2018-01-25
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Citations: View citations in EconPapers (13)

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