Point targets, tolerance bands or target ranges? Inflation target types and the anchoring of inflation expectations

• 成果类型: Article
• 署名作者: Ehrmann, Michael
• 署名单位: European Central Bank; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2021.103514
• 发表日期: 2021
• 关键词: Inflation targeting; Inflation expectations; Point target; Tolerance band; Target range

摘要

Inflation targeting is implemented in different ways - typically by adopting point targets, with or without tolerance bands, or by specifying target ranges. Using data for 20 economies (half of which are advanced and emerging market economies, respectively), this paper tests whether the various target types anchor inflation expectations differently. By studying to what extent inflation expectations are responsive to past inflation and how much forecasters disagree, it tests two contradictory hypotheses, namely that targets with intervals lead to (i) less anchor-ing, e.g. because they provide more flexibility to the central bank, or (ii) better anchoring, be-cause they are missed less often, leading to an enhanced credibility. The evidence refutes the first hypothesis, and generally finds that target ranges or (in some cases) tolerance bands out-perform the other types. However, the effects partially depend on the economic context and no target type consistently outperforms all others. This suggests that there are some benefits to adopting intervals, but the central bank can anchor inflation expectations also by other means. (c) 2021 Elsevier B.V. All rights reserved.