Arbeitspapier

Point targets, tolerance bands, or target ranges? Inflation target types and the anchoring of inflation expectations

Inflation targeting is implemented in different ways - most often by adopting point targets, by having tolerance bands around a point target, or by specifying target ranges. Using data for 20 economies, this paper tests whether the various target types affect the anchoring of inflation expectations at shorter horizons differently. It tests two contradictory hypotheses, namely that targets with intervals lead to (i) less anchoring, e.g. because they provide more flexibility to the central bank, or (ii) better anchoring, because they are missed less often, leading to an enhanced credibility. The evidence refutes the first hypothesis, and generally finds that target ranges or (in some cases) tolerance bands outperform the other types. However, the effects partially depend on the economic context and no target type consistently outperforms all others. This suggests that there are some benefits to adopting intervals, but the central bank can anchor inflation expectations also by other means.

ISBN
978-92-899-4748-0
Sprache
Englisch

Erschienen in
Series: ECB Working Paper ; No. 2562

Klassifikation
Wirtschaft
Monetary Policy
Central Banks and Their Policies
Price Level; Inflation; Deflation
Thema
inflation targeting
inflation expectations
point target
tolerance band
target range

Ereignis
Geistige Schöpfung
(wer)
Ehrmann, Michael
Ereignis
Veröffentlichung
(wer)
European Central Bank (ECB)
(wo)
Frankfurt a. M.
(wann)
2021

DOI
doi:10.2866/411165
Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Ehrmann, Michael
  • European Central Bank (ECB)

Entstanden

  • 2021

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