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Inflation Targeting: What is the Meaning of the Bottom of the Band?
Author:
Mr. Eric V. Clifton
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Series:
IMF Policy Discussion Papers
Volume/Issue:
Volume 1999: Issue 008
Language:
English
Publication Date:
01 Dec 1999
DOI:
https://doi.org/10.5089/9781451970906.003
ISBN:
9781451970906
ISSN:
1564-5193
Pages:
24
Keywords:
PDP; government; inflation target; Inflation targeting; credibility; monetary policy; target band; inflation rate; A. General regime design; IT literature; inflation targeting experience; IT framework; inflation targeting framework; inflation target band; Inflation; Disinflation; Price stabilization
Legal-disclaimer:
This Policy Discussion Paper should not be reported as representing the views of the IMF. The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Policy Discussion Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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This paper investigates the meaning of the bottom of target bands in inflation targeting regimes. It is argued that the design of lower limits on target bands, if not done with care, can lead to a lack of transparency, potentially confusing markets about how the authorities will react to a fall in inflation. After first discussing the conceptual issues, the paper then examines the experience with target bands in New Zealand, Israel and Canada and explores how the conceptual issues have played out in practice.
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Cover IMF Policy Discussion Papers
IMF Policy Discussion Papers
ISSN:
1564-5193
Publisher:
International Monetary Fund
Volume 1999: Issue 008