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How Tolerant Should Inflation-Targeting Central Banks Be? Selecting the Proper Tolerance Band : Lessons from Sweden

Andersson, Fredrik N G LU and Jonung, Lars LU (2017) In Working Papers 2017(2).
Abstract (Swedish)
Should an inflation-targeting central bank have an explicit tolerance band around its inflation target? This paper provides an answer derived from the Swedish experience. The Riksbank is exceptional in the sense that it first adopted and later abolished an explicit band and is currently considering bringing it back. We conclude that the band should be explicit for several reasons. Most important, an inflation-targeting central bank should be open and transparent to the public regarding its actual ability to control inflation. We discuss how a numerical measure of the proper width of the band can be constructed to foster communication and credibility.
Abstract
Should an inflation-targeting central bank have an explicit tolerance band around its inflation target? This paper provides an answer derived from the Swedish experience. The Riksbank is exceptional in the sense that it first adopted and later abolished an explicit band and is currently considering bringing it back. We conclude that the band should be explicit for several reasons. Most important, an inflation-targeting central bank should be open and transparent to the public regarding its actual ability to control inflation. We discuss how a numerical measure of the proper width of the band can be constructed to foster communication and credibility.
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
inflation target, monetary policy, tolerance band, riksbank, Sweden, inflation targeting, tolerance band, tolerance interval, monetary policy, the Riksbank, Sweden, E30, E31, E58.
in
Working Papers
volume
2017
issue
2
pages
22 pages
publisher
Department of Economics, Lund University
language
English
LU publication?
yes
id
30015233-df2d-489d-b419-54bd8ede1b40
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2017_002.htm
date added to LUP
2017-02-14 14:55:29
date last changed
2017-02-14 15:15:56
@misc{30015233-df2d-489d-b419-54bd8ede1b40,
  abstract     = {Should an inflation-targeting central bank have an explicit tolerance band around its inflation target? This paper provides an answer derived from the Swedish experience. The Riksbank is exceptional in the sense that it first adopted and later abolished an explicit band and is currently considering bringing it back. We conclude that the band should be explicit for several reasons. Most important, an inflation-targeting central bank should be open and transparent to the public regarding its actual ability to control inflation. We discuss how a numerical measure of the proper width of the band can be constructed to foster communication and credibility.},
  author       = {Andersson, Fredrik N G and Jonung, Lars},
  keyword      = {inflation target,monetary policy,tolerance band,riksbank,Sweden,inflation targeting,tolerance band,tolerance interval,monetary policy,the Riksbank,Sweden,E30,E31,E58. },
  language     = {eng},
  month        = {02},
  note         = {Working Paper},
  number       = {2},
  pages        = {22},
  publisher    = {Department of Economics, Lund University },
  series       = {Working Papers},
  title        = {How Tolerant Should Inflation-Targeting Central Banks Be? Selecting the Proper Tolerance Band : Lessons from Sweden},
  volume       = {2017},
  year         = {2017},
}