Statistical Implications of Inflation Targeting


Carol Carson, Claudia Dziobek, and Charles Enoch
Published Date:
September 2002
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Introduction to Part IV

REFLECTING ON the Czech Republic’s experience, Oldrich Dedek (Chapter 15) emphasizes that the adoption of inflation targeting did not constitute a dramatic turning point with respect to the demand for, scope of, or quantity of statistical data. Nevertheless, some changes occurred. An additional measure of inflation—net inflation—was introduced, and an inflation forecast developed. The main objective was to keep monetary policy objectives separate from politicized issues, as for example prices of housing. Dedek also notes that inflation targeting places more demands on data quality, accuracy, consistency, and methodology. In this context he acknowledges the role of the IMF’s Special Data Dissemination Standard (SDDS) program as a major contribution to the international financial architecture, citing foreign investors’ appreciation of timeliness and comparability of data. External vulnerability indicators may be an area for further development of the SDDS. Bond yields figures will be reported in the context of the European Union requirements; these may also be useful to include in IMF data.

Edgar Ayales, Randall C. Merris, and Alfredo Torrez (Chapter 16) point out that the IMF’s flagship statistical publication, International Financial Statistics (IFS), is arranged to support the IMF’s operational work; it reflects the data needs of the IMF’s financial programming model of the economy, and hence it is focused on monetary and credit aggregates, as well as other stock figures. This contrasts somewhat with the emphasis on prices and “flow” data that is at the forefront of information requirements of countries that have adopted inflation-targeting regimes. Should the IMF refocus the IFS and place more emphasis on price data, interest rate data, and other forward-looking data? Should the inflation targets be described in more depth in IFS? Should price statistics in IFS be broadened? Should data on forecasting be included?

Armida San José, Graham L. Slack, and Subramanian S. Sriram (Chapter 17) first describe the statistical principles underlying inflation-targeting regimes, including the choice of indicators, cooperation among responsible agencies, transparency, and methodological soundness. They then map these against the IMF’s various data initiatives, in particular the SDDS, and more recently the Data Quality Assessment Framework (DQAF) developed to complement the IMF’s data dissemination standards, as well as the various initiatives to develop international standards for macroeconomic accounting. The concluding section on issues for discussion lays out ways in which the data initiatives could be broadened or supplemented to incorporate the information requirements of inflation-targeting frameworks.

Considering the IMF’s resource constraints in obtaining additional data, Masahiko Takeda (Chapter 18) develops an argument for focusing on data for market inflation expectations, extending academic work on inflation-targeting policy. He points out that such data are increasingly published by central banks, making it feasible for the IMF to collect and disseminate the data.

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