Setting the Operational Framework for Producing Inflation Forecasts

47 Pages Posted: 21 Jun 2006

See all articles by Jorge Iván Canales-Kriljenko

Jorge Iván Canales-Kriljenko

International Monetary Fund (IMF)

Turgut Kisinbay

International Monetary Fund (IMF)

Rodolfo Maino

International Monetary Fund (IMF)

Eric Parrado

Central Bank of Chile

Date Written: May 2006

Abstract

How should a central bank organize itself to produce the best possible inflation forecast? This paper discusses elements for building a comprehensive platform for an inflation forecasting framework. It describes the exercise of forecasting inflation as a production process, which induces a strict discipline concerning data management, information gathering, the use of a suitable statistical apparatus, and the exercise of sound communication strategies to reinforce reputation and credibility. It becomes critical how a central bank organizes itself to produce relevant macroeconomic forecasts, with special consideration to product design, the essential requirements needed in the forecasting process, and key related organizational issues. In addition, the paper proposes to factor into the process the authorities' policy responses to previous inflation forecasts in order to be consistent with the spirit of the inflation targeting framework.

Keywords: Inflation forecasting, central bank organization, communication

JEL Classification: E47, E52, E58

Suggested Citation

Canales-Kriljenko, Jorge Iván and Kisinbay, Turgut and Maino, Rodolfo and Parrado, Eric, Setting the Operational Framework for Producing Inflation Forecasts (May 2006). IMF Working Paper No. 06/122, Available at SSRN: https://ssrn.com/abstract=910687

Jorge Iván Canales-Kriljenko

International Monetary Fund (IMF) ( email )

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

Turgut Kisinbay

International Monetary Fund (IMF) ( email )

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

Rodolfo Maino (Contact Author)

International Monetary Fund (IMF) ( email )

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

Eric Parrado

Central Bank of Chile ( email )

Agustinas 1180
Santiago
Chile

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