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Inflation Targeting: What is the Meaning of the Bottom of the Band?

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  • Mr. Eric V. Clifton

Abstract

This paper investigates the meaning of the bottom of target bands in inflation targeting regimes. It is argued that the design of lower limits on target bands, if not done with care, can lead to a lack of transparency, potentially confusing markets about how the authorities will react to a fall in inflation. After first discussing the conceptual issues, the paper then examines the experience with target bands in New Zealand, Israel and Canada and explores how the conceptual issues have played out in practice.

Suggested Citation

  • Mr. Eric V. Clifton, 1999. "Inflation Targeting: What is the Meaning of the Bottom of the Band?," IMF Policy Discussion Papers 1999/008, International Monetary Fund.
    • Handle: RePEc:imf:imfpdp:1999/008
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=3375
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    Cited by:

    1. Saborowski, Christian, 2010. "Inflation targeting as a means of achieving disinflation," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2510-2532, December.
    2. Mr. Chorng-Huey Wong & Mr. Eric V. Clifton & Mr. Gene L. Leon, 2001. "Inflation Targeting and the Unemployment-Inflation Trade-off," IMF Working Papers 2001/166, International Monetary Fund.
    3. Mr. Scott Roger & Mr. Mark R. Stone, 2005. "On Target? the International Experience with Achieving Inflation Targets," IMF Working Papers 2005/163, International Monetary Fund.
    4. Jiri Jonas & Frederic S. Mishkin, 2003. "Inflation Targeting in Transition Countries: Experience and Prospects," NBER Working Papers 9667, National Bureau of Economic Research, Inc.

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