Inflation Forecast Contracts

Arbeitspapier

We introduce a new type of incentive contract for central bankers: inflation forecast contracts, which make central bankers’ remunerations contingent on the precision of their inflation forecasts. We show that such contracts enable central bankers to influence inflation expectations more effectively, thus facilitating more successful stabilization of current inflation. Inflation forecast contracts improve the accuracy of inflation forecasts, but have adverse consequences for output. On balance, paying central bankers according to their forecasting performance improves welfare.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Working Paper Series ; No. 11/149

Classification and Topics

• Classification: Wirtschaft ; Central Banks and Their Policies
• Subject: central banks ; incentive contracts ; transparency ; inflation targeting ; inflation forecast targeting ; intermediate targets ; Inflationssteuerung ; Inflationserwartung ; Politische Kommunikation ; Experten ; Leistungsanreiz ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gersbach, Hans ; Hahn, Volker
• Event: Veröffentlichung
• (who): ETH Zurich, CER-ETH - Center of Economic Research
• (where): Zurich
• (when): 2011

Further information

• DOI: doi:10.3929/ethz-a-006562013
• Handle: http://hdl.handle.net/10419/171592
• Last update: 10.03.2025, 11:44 AM CET