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

19 Pages Posted: 14 Mar 2018

See all articles by Steve Brito

Steve Brito

International Monetary Fund (IMF)

Yan Carriere-Swallow

International Monetary Fund (IMF)

Bertrand Gruss

International Monetary Fund (IMF)

Date Written: January 2018

Abstract

We estimate the determinants of disagreement about future inflation in a large and diversesample of countries, focusing on the role of monetary policy frameworks. We offer novelinsights that allow us to reconcile mixed findings in the literature on the benefits of inflationtargeting regimes and central bank transparency. The reduction in disagreement that followsthe 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 targetingadoption have accrued mainly to countries that started from a low level of transparency.These have tended to be developing countries.

Keywords: Inflation targeting, Central banks and their policies, central bank transparency, inflation forecasts, Monetary Policy (Targets, Instruments, and Effects), Forecasting and Other Model Applications

JEL Classification: E52, E58, C53

Suggested Citation

Brito, Steve and Carriere-Swallow, Yan and Gruss, Bertrand, Disagreement About Future Inflation: Understanding the Benefits of Inflation Targeting and Transparency (January 2018). IMF Working Paper No. 18/24. Available at SSRN: https://ssrn.com/abstract=3140330

Steve Brito (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Yan Carriere-Swallow

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Bertrand Gruss

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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