Advancing Inflation Targeting in Central Europe: Strategies, Policy Rules and Empirical Evidence

Abstract:     
This paper analyses the evolution of inflation targeting policies in Central European countries. The origins of their inflation targeting strategies are examined, above all the commitment to price stability as well as the inability of prior policy regimes to engender financial stability. Recent policy modifications toward greater flexibility of inflation targeting are reviewed and a system of targeting the differentials between the domestic and the euro area inflation forecast is advocated as conducive to achieving euro-convergence.

Keywords: inflation targeting, monetary convergence, euro adoption, EU new member states

JEL Classification: E42, E52, F36, P24

Accepted Paper Series