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Inflation targets and the benefits of an explicit tolerance band

Andersson, Fredrik N G LU and Jonung, Lars LU (2017) In VOXEU
Abstract (Swedish)
Inflation-targeting central banks commonly fail to hit their official inflation targets, so targets are combined with a tolerance band which is either implicit or explicit. Taking the Swedish Riksbank as an example, this column argues that adopting an explicit tolerance band would better communicate to the public the central bank’s lack of full control over the rate of inflation and thus foster public confidence in monetary policy, and it would also increase the central bank’s ability to stabilise the economy. The width of the band can be derived from the historical inflation outcome.
Abstract
Inflation-targeting central banks commonly fail to hit their official inflation targets, so targets are combined with a tolerance band which is either implicit or explicit. Taking the Swedish Riksbank as an example, this column argues that adopting an explicit tolerance band would better communicate to the public the central bank’s lack of full control over the rate of inflation and thus foster public confidence in monetary policy, and it would also increase the central bank’s ability to stabilise the economy. The width of the band can be derived from the historical inflation outcome.
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
central banks, inflation, inflation targeting, monetary policy, EU, eurozone, price stability
in
VOXEU
language
English
LU publication?
yes
id
580b4d72-4374-45bb-9cb0-14a73d863f84
alternative location
http://voxeu.org/article/inflation-targets-and-benefits-explicit-tolerance-ban
date added to LUP
2017-05-08 09:40:46
date last changed
2017-05-09 10:25:54
@misc{580b4d72-4374-45bb-9cb0-14a73d863f84,
  abstract     = {Inflation-targeting central banks commonly fail to hit their official inflation targets, so targets are combined with a tolerance band which is either implicit or explicit. Taking the Swedish Riksbank as an example, this column argues that adopting an explicit tolerance band would better communicate to the public the central bank’s lack of full control over the rate of inflation and thus foster public confidence in monetary policy, and it would also increase the central bank’s ability to stabilise the economy. The width of the band can be derived from the historical inflation outcome.},
  author       = {Andersson, Fredrik N G and Jonung, Lars},
  keyword      = {central banks,inflation,inflation targeting,monetary policy,EU,eurozone,price stability},
  language     = {eng},
  month        = {05},
  series       = {VOXEU},
  title        = {Inflation targets and the benefits of an explicit tolerance band},
  year         = {2017},
}