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Inflation targets and inflation expectations: some evidence from the recent oil shocks

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  • Jason Tjosvold
  • Bharat Trehan

Abstract

A great deal of recent research has pointed out the benefits of adopting inflation targets, emphasizing, in particular, their role in helping to stabilize inflation expectations. These arguments suggest that inflation expectations in countries that target inflation should react differently to the recent oil price shocks than expectations in countries that do not target inflation. We examine whether this is indeed the case by comparing the recent behavior of inflation expectations in the U.S. - which does not have an explicit inflation target - with the behavior of inflation expectations in Canada and the U.K., which do.

Suggested Citation

  • Jason Tjosvold & Bharat Trehan, 2006. "Inflation targets and inflation expectations: some evidence from the recent oil shocks," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue sep1.
    • Handle: RePEc:fip:fedfel:y:2006:i:sep1:n:2006-22
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    References listed on IDEAS

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    1. Marvin Goodfriend, 2004. "Inflation Targeting in the United States?," NBER Chapters, in: The Inflation-Targeting Debate, pages 311-337, National Bureau of Economic Research, Inc.
    2. Hoover, Kevin D. & Perez, Stephen J., 1994. "Post hoc ergo propter once more an evaluation of 'does monetary policy matter?' in the spirit of James Tobin," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 47-74, August.
    3. Frederic S. Mishkin, 2004. "Why the Federal Reserve Should Adopt Inflation Targeting," International Finance, Wiley Blackwell, vol. 7(1), pages 117-127, March.
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    Cited by:

    1. Pablo Pincheira B & Álvaro García M, 2007. "Oil Shocks and Inflation The Case Of Chile and a Sample of Industrial Countries," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 10(1), pages 5-36, April.

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    Keywords

    Inflation (Finance);

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