- Part I INFORMATION REQUIREMENTS FOR INFLATION TARGETING
- 1 Anchoring Inflation Expectations
- 2 The Bank of Canada’s Approach to Inflation Targeting
- 3 Statistical Implications of Inflation Targeting in South Africa
- 4 Informational Requirements of Inflation Targeting in the Philippines
- 5 The Experience of Statistics Sweden
- 6 Information Requirements for Inflation Targeting: Observations Based on the Australian Experience
- Part II DEFINING AND MEASURING THE TARGET
- 7 The U.K. Office for National Statistics and the Inflation Target
- 8 Eurostat’s HICP and the European Central Bank’s Definition of Price Stability
- 9 Design, Measurement, and Communication: Chile’s Experience with Inflation Targeting
- 10 Price Indices for Inflation Targeting
- Part III DERIVING MEASURES OF INFLATION AND INFLATION EXPECTATIONS FROM THE MARKET DATA
- 11 The Bank of England’s Approach
- 12 On Market-Based Measures of Inflation Expectations
- 13 Regime-Oriented Data Coverage Standards: Case Study of Inflation Targeting in Israel
- 14 The Experience of Banco Central do Brasil
- Part IV IMPLICATIONS FOR THE IMF
- 15 The Experience of the Czech National Bank
- 16 Inflation Targeting: Statistical Issues Suggested by the Experience of Six Emerging Market Countries
- 17 Statistical Principles for Inflation-Targeting Regimes and the Role of IMF Data Initiatives
- 18 Usefulness of Private Inflation Forecasts in Inflation Targeting
- Part V CONCLUSIONS
- 19 Taking the Agenda Forward
Front Matter
- Carol Carson, Claudia Dziobek, and Charles Enoch
- Published Date:
- September 2002

Statistical Implications of Inflation Targeting
GETTING THE RIGHT NUMBERS
AND
GETTING THE NUMBERS RIGHT
EDITORS
CAROL S. CARSON
CHARLES ENOCH
CLAUDIA DZIOBEK
Papers presented at the
IMF Seminar on Statistical Implications
of Inflation Targeting, Washington, D.C.,
February 28-March 1, 2002
STATISTICS DEPARTMENT
INTERNATIONAL MONETARY FUND
© 2002 International Monetary Fund
Production: IMF Graphics Section
Cover design: Lai Oy Louie
Figures: Theodore F. Peters, Jr.
Typesetting: Choon Lee
Cataloging-in-Publication Data
Statistical implications of inflation targeting : getting the right numbers and getting the numbers right / editors, Carol S. Carson, Charles Enoch, Claudia Dziobek — [Washington, D.C.] : International Monetary Fund, Statistics Dept., 2002.
p. cm.
Papers presented at the IMF Seminar on Statistical Implications of Inflation Targeting, Washington, D.C., February 28-March 1, 2002. ISBN 1-58906-132-2
1. Inflation (Finance) — Statistics — Congresses. 2. International Monetary Fund — Congresses. I. Carson, Carol S. II. Enoch, Charles. III. Dziobek, Claudia Helene, 1956– IV. International Monetary Fund. Statistics Dept.
HG229.S73 2002
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Contents
1. Anchoring Inflation Expectations
Horst Köhler
2. The Bank of Canada’s Approach to Inflation Targeting
Malcolm Knight, Robert Fay, and Brian O’Reilly
3. Statistical Implications of Inflation Targeting in South Africa
Pali J. Lehohla and Annette Myburgh
4. Informational Requirements of Inflation Targeting in the Philippines
Amando M. Tetangco Jr. and Ma. Cyd N. Tuano-Amador
5. The Experience of Statistics Sweden
Svante Öberg and Hans Lindblom
6. Information Requirements for Inflation Targeting: Observations Based on the Australian Experience
Glenn Stevens
7. The U.K. Office for National Statistics and the Inflation Target
Amanda Rowlatt
8. Eurostat’s HICP and the European Central Bank’s Definition of Price Stability
Vítor Gaspar
9. Design, Measurement, and Communication: Chile’s Experience with Inflation Targeting
Pablo García
10. Price Indices for Inflation Targeting
Adriaan M. Bloem, Paul A. Armknecht, and Kimberly D. Zieschang
11. The Bank of England’s Approach
Roger Clews
12. On Market-Based Measures of Inflation Expectations
Cedric Scholtes
13. Regime-Oriented Data Coverage Standards: Case Study of Inflation Targeting in Israel
Edward (Akiva) Offenbacher and Meir Sokoler
14. The Experience of Banco Central do Brasil
Gustavo Bussinger
15. The Experience of the Czech National Bank
Oldrich Dedek
Edgar Ayales, Randall C. Merris, and Alfredo Torrez
17. Statistical Principles for Inflation-Targeting Regimes and the Role of IMF Data Initiatives
Armida San Jose, Graham L. Slack, and Subramanian S. Sriram
18. Usefulness of Private Inflation Forecasts in Inflation Targeting
Masahiko Takeda
Carol S. Carson, Charles Enoch, and Claudia Dziobek
Chapter Appendices
16.1. Exchange Rate Regimes and Anchors of Monetary Policy as of December 31, 2001
17.2. The IMF’s Data Quality Assessment Framework—Generic Framework
Boxes
17.1. Data Quality Assessment Framework (DQAF)—Dimensions of Quality
Tables
2.3. Canada: Selected Indicators Pertaining to Wage Negotiations
17.1. Coverage of Special Data Dissemination Standard (SDDS) Data Categories 322
Figures
2.1. Canada: Total CPI and CPI Adjusted for the Effect of Changes in Indirect Taxes
2.9. Canada: Expected Three-Month Commercial Paper Rates, October 23 Fixed Announcement Date
2.10. Canada: Expected Three-Month Commercial Paper Rates, November 23 Fixed Announcement Date
2.14. Canada: Long-Term Dispersion of Inflation Expectations
2.15. Canada: Ratio of Long-Term Business Credit to Total Business Credit
2.16. Canada: CPI Adjusted for the Effect of Changes in Indirect Taxes
3.1. South Africa: Annual Percentage Change in the Derivatives of the CPI for the Metropolitan Areas
11.2. United Kingdom: Two-Week Forward Curves as of February 20, 2002
11.3. United Kingdom: Annualized Growth Rates of Retail Prices
11.4. United Kingdom: Year-on-Year Changes of Retail Price Indices and Policy Rate
11.5. United Kingdom: Implied 12-Month Inflation Forward Rate, 7 Years Ahead
11.6. United Kingdom: Implied 12-Month Inflation Forward Rates, 5 and 15 Years Ahead
12.2. International Break-Even Inflation Yields Derived from Government Securities
12.5. United Kingdom: Difference Between Two-Year Break-Even and Survey-Based Inflation Expectations
12.6. United Kingdom: One-Year Break-Even Inflation Forward Rate Ten Years Out Since 1985
13.2. Israel: Market-Based Inflation Expectations—“Yield” Curves
13.3. Israel: Inflation Expectations for 12 Months—Model, Market, and Forecasters
13.6. Israel: Implied Volatility from Call Options According to Strike Price (Smile)
13.7. Israel: 12-Month Forecasts of Professional Forecasters
13.8. Israel: Composition of Public’s Financial Assets Portfolio
The following conventions are used in this volume:
… to indicate that data are not available or not applicable;
— to indicate that the figure is zero or less than half the final digit shown;
– between years or months (for example, 1991–92 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years or months (for example, 1991/92) to indicate a fiscal or financial year.
“Billion” means a thousand million; “trillion” means a thousand billion.
“Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).
Minor discrepancies between constituent figures and totals are due to rounding.
* * *
As used in this report, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.
Foreword
In recent years, macroeconomic policy formulation has moved to more explicit use of statistics; at the same time, added attention is being given to the development of forward-looking indicators. A prominent example is the monetary policy framework of inflation targeting that is being adopted by a growing number of countries. While many of the conceptual aspects of inflation targeting have been studied in detail in recent years, there has been little attention to statistical issues: Which statistics are needed? What does it take to compile them? And what is the role of the public sector, including the IMF, in encouraging good practice in compilation and use?
Monetary policy committees, rather than focusing exclusively on money and credit aggregates, look increasingly at market-based statistics—for instance, at asset prices and market-derived implicit inflation forecasts. Such data have traditionally not been integrated into a country’s typical data framework. The Seminar on the Statistical Implications of Inflation Targeting, held in Washington, D.C., during February 28-March 1, 2002, provided an opportunity for statistical agencies and central banks to explore together the issues that are of common interest in this regard. The importance of developing new forms of collaboration between statistical agencies and central banks emerged as a central theme of the seminar.
The seminar examined country experience in these areas. Some areas were identified where inflation targeting requires additional or more detailed statistics from those used hitherto. Even more important, seminar participants emphasized the greater discipline involved in handling information, the added transparency, and hence the enhanced focus on data quality. We hope that the seminar proceedings provide central banks, statistics agencies, academics, and outside observers with some new ideas and some guidance on the information aspects of inflation targeting regimes.
Carol S. Carson
Charles Enoch
Claudia Dziobek
Acknowledgments
Many of our colleagues helped to put this volume together. The editors gratefully acknowledge overall guidance from Thomas McLoughlin; editorial support from James McEuen, Ellen Coughlin, and Joan Gibson; research support from Silvano Spencer and Mbaye Gueye; and administrative assistance from Niccole Braynen-Kimani, Elia Cadena, Janice Irving, Lidia Tokuda, and Kris Bengtson. Jennifer Kelly coordinated the administrative arrangements for the seminar.
Abbreviations
System of National Accounts 1993
Adjusted domestic supply price index
Autoregressive conditional heteroskedasticity
Banco de la República (Colombia)
Bank of Mexico
Bank of Thailand
Basis point
Balance of Payments Manual, fifth edition
Bangko Sentral ng Pilipinas
Central African Economic and Monetary Union
Capital asset pricing model
Central Bank of Brazil
Central Bank of Chile
Consumption-based capital asset pricing model
Centre for Economic Policy Research
Core inflation index
Czech National Bank
Classification of individual consumption by purpose
Cost-of-living adjustment
Cost-of-living index
Monetary Policy Committee (Brazil)
Consumer price index
Consumer price index for wage earners and clerical workers
Consumer price index excluding interest rates on mortgage bonds or excluding fuel prices (South Africa)
Consumer price index excluding fuel prices (Chile)
Central Statistical Office (U.K.)
Departamento Administrativo Nacional de Estadísticas (Colombia)
Development Budget Coordination Committee (Philippines)
Debt Management Office (U.K.)
Data Quality Assessment Framework (IMF)
Dissemination Standards Bulletin Board (IMF)
Domestic supply price index
Domestic final purchases
European Commission
European Central Bank
Eastern Caribbean Currency Union
Economic and Financial Affairs Council
European currency unit
Economic and Monetary Union
Exchange rate mechanism
Exchange rate mechanism, phase II
European System of Accounts
European System of Central Banks
European Union
European Union Treaty
free-on-board
Financial soundness indicator
Financial Times Stock Exchange
Group of Ten countries
General Data Dissemination System (IMF)
Gross domestic product
Gross fixed capital formation deflator
Gross national product
Harmonized index of consumer prices
Her Majesty’s (U.K.)
Institute of Geography and Statistics (Brazil)
International Financial Statistics (IMF)
Interim index of consumer prices (EU)
Index-linked
Index-linked gilt
Instituto Nacional de Estadísticas (Chile)
Implicit output price index
Inflation risk premium
Inflation term structure
Life assurance and pension funds (U.K.)
London interbank offered rate
Market-based inflation expectations
Market-based interest rate expectations
Monetary Conditions Index (IMF)
Minimum funding requirement
Monetary Policy Committee (U.K.)
Monetary Policy Report (Chile)
Monetary Union index of consumer prices (EU)
Net domestic assets
Net international reserves
National Summary Data Page
National Statistics Office (Philippines)
Organization for Economic Cooperation and Development
Ordinary least squares
Office for National Statistics (U.K.)
Organization of Petroleum Exporting Countries
Producer price index
Quarterly Projection Model (Bank of Canada)
Reserve Bank of Australia
Rational expectations hypothesis
Report on the Observance of Standards and Codes (IMF)
Regime-oriented data coverage standard
Retail price index (U.K.)
Retail Prices Index Advisory Committee (U.K.)
Retail price index excluding mortgage interest payments (U.K.)
Real stochastic discount figure
Special Data Dissemination Standard (IMF)
Special drawing right (IMF)
Service-level agreement (U.K.)
Statistical Program Committee
Tel Aviv Stock Exchange
Treasury Inflation Protected Securities (U.S.)
Manual on Statistics of International Trade in Services
Vector auto regression
Variable roughness penalty
West African Economic and Monetary Union