Inflation Targeting: What is the Meaning of the Bottom of the Band?

Author/Editor:

Eric V. Clifton

Publication Date:

December 1, 1999

Electronic Access:

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Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Policy Discussion Paper No. 1999/008

Subject:

Banking Disinflation Inflation Inflation targeting Monetary policy Price stabilization Prices

English

Publication Date:

December 1, 1999

ISBN/ISSN:

9781451970906/1564-5193

Stock No:

PPIEA0081999

Pages:

24

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