How Tolerant Should Inflation-Targeting Central Banks Be? Selecting the Proper Tolerance Band - Lessons from Sweden

Arbeitspapier

Should an inflation-targeting central bank have an explicit tolerance band around its inflation target? This paper provides an answer derived from the Swedish experience. The Riksbank is exceptional in the sense that it first adopted and later abolished an explicit band and is currently considering bringing it back. We conclude that the band should be explicit for several reasons. Most important, an inflation-targeting central bank should be open and transparent to the public regarding its actual ability to control inflation. We discuss how a numerical measure of the proper width of the band can be constructed to foster communication and credibility.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2017:2

Classification and Topics

• Classification: Wirtschaft ; Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) ; Price Level; Inflation; Deflation ; Central Banks and Their Policies
• Subject: inflation targeting ; tolerance band ; tolerance interval ; monetary policy ; the Riksbank ; Sweden

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Andersson, Fredrik N. G. ; Jonung, Lars
• Event: Veröffentlichung
• (who): Lund University, School of Economics and Management, Department of Economics
• (where): Lund
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/260211
• Last update: 10.03.2025, 11:44 AM CET