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Hits and Misses: Ten Years of Czech Inflation Targeting (Introduction)

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Abstract

The first 10 years of Czech Republic's inflation targeting regime have been remarkable by the persistent undershooting of the inflation targets. This article is an introduction to a special issue aimed at analyzing the factors of the undershooting. The articles in this issue explore the following hypotheses: the impact of a series of counter-inflationary shocks; a biased forecasting system; a faulty decision-making system; and the role of inflation expectations. Based on a meta-analysis of the articles, this introduction suggests that the undershooting cannot be explained by a single factor, although counter-inflationary shocks are identified most frequently. The impact of the undershooting on central bank credibility was modest, partly because the forecasts were accompanied by explicit discussions of the forecast risks.

Suggested Citation

  • Katerina Smidkova & Aleš Bulíø, 2008. "Hits and Misses: Ten Years of Czech Inflation Targeting (Introduction)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(09-10), pages 398-405, December.
    • Handle: RePEc:fau:fauart:v:58:y:2008:i:9-10:p:398-405
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    1. Franta, Michal & Saxa, Branislav & Šmídková, Kateřina, 2007. "Inflation persistence: euro area and new EU Member States," Working Paper Series 810, European Central Bank.
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    5. Athanasios Orphanides & David W. Wilcox, 2002. "The Opportunistic Approach to Disinflation," International Finance, Wiley Blackwell, vol. 5(1), pages 47-71.
    6. Tomáš Holub & Jaromír Hurník, 2008. "Ten Years of Czech Inflation Targeting: Missed Targets and Anchored Expectations," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(6), pages 67-86, November.
    7. Paul R. Masson & Miguel A. Savastano & Sunil Sharma, 2019. "The Scope for Inflation Targeting in Developing Countries," World Scientific Book Chapters, in: Macroeconomic Modelling and Monetary and Exchange Rate Regimes, chapter 10, pages 331-383, World Scientific Publishing Co. Pte. Ltd..
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    More about this item

    Keywords

    inflation targeting; forecasting system; inflation expectations;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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