English, Article, Journal or magazine article edition: Strict and Flexible Inflation Forecast Targets: An Empirical Investigation Glenn Otto; Graham Voss

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Bookmark: http://trove.nla.gov.au/version/17038
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Strict and Flexible Inflation Forecast Targets: An Empirical Investigation
Author
  • Glenn Otto
  • Graham Voss
Physical Description
  • preprint
Notes
  • We examine whether standard theoretical models of inflation forecast targeting are consistent with the observed behaviour of the central banks of Australia, Canada, and the United States. The target criteria from these models restrict the conditionally expected paths of variables targeted by the central bank, in particular inflation and the output gap. We estimate various moment conditions, providing a description of monetary policy for each central bank under different maintained hypotheses. We then test whether these estimated conditions satisfy the predictions of models of optimal monetary policy. The overall objective is to examine the extent to which and the manner in which these central banks successfully balance inflation and output objectives over the near term. For all three countries, we obtain reasonable estimates for both the strict and flexible inflation forecast targeting models, though with some qualifications. Most notably, for Australia and the United States there are predictable deviations from forecasted targets, which is not consistent with models of inflation targeting. In contrast, the results for Canada lend considerable support to simple models of flexible inflation forecast targeting.
  • RePEc:hkm:wpaper:202009
  • Monetary policy, inflation, inflation targeting, central banks
  • RePEc:vic:vicddp:0902
Language
  • English
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