What Should the Inflation Target Be? Views from 600 Economists

50 Pages Posted: 27 May 2022

See all articles by Gene Ambrocio

Gene Ambrocio

Bank of Finland

Andrea Ferrero

University of Oxford - Department of Economics

Esa Jokivuolle

Bank of Finland, Research Unit

Kim Ristolainen

University of Turku

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2022

Abstract

In a survey of more than 600 economists, most respondents prefer their central bank to have an explicit inflation target. Roughly half want the central bank to keep its current target. Two thirds of the rest want to raise the target, with a median preferred change of one percentage point. In a hypothetical scenario in which the central bank has no prior history of inflation targeting, an additional 12% of the respondents would prefer a different (typically higher) target than the current one. This result suggests that the costs of changing the current target hold some respondents back from wanting an actual target change. Respondents who are worried about the central bank credibility are less likely to support a target raise. Conversely, preference for a target raise is more likely to come from those who are concerned about the zero lower bound on the nominal interest rate. The average estimate of the equilibrium real interest rate in the sample is 0.6%. However, personal views about the equilibrium real interest rate do not predict a preference for a target raise.

Keywords: expert survey, inflation target, monetary policy

JEL Classification: C38, E31, E52, E58

Suggested Citation

Ambrocio, Gene and Ferrero, Andrea and Jokivuolle, Esa and Ristolainen, Kim, What Should the Inflation Target Be? Views from 600 Economists (May 1, 2022). CEPR Discussion Paper No. DP17289, Available at SSRN: https://ssrn.com/abstract=4121474

Gene Ambrocio (Contact Author)

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Andrea Ferrero

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Esa Jokivuolle

Bank of Finland, Research Unit ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland
+358 10 831 2309 (Phone)

HOME PAGE: http://www.bof.fi/en/suomen_pankki/organisaatio/asiantuntijoita/jokivuolle_esa/

Kim Ristolainen

University of Turku ( email )

Turku, 20014
Finland

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