Twenty Years of Inflation Targeting

There is now a remarkably strong consensus among academics and professional economists that central banks should adopt explicit inflation targets and that all key monetary policy decisions, especially those concerning interest rates, should be made with a view to ensuring that these targets are achieved. This book provides a comprehensive review of the experience of inflation targeting since its introduction in New Zealand in 1989 and looks in detail at what we can learn from the past twenty years and what challenges we may face in the future. Written by a distinguished team of academics and professional economists from central banks around the world, the book covers a wide range of issues including many that have arisen as a result of the recent financial crisis. It should be read by anyone concerned with better understanding inflation targeting and its past, present and future role within monetary policy. 'After the financial crisis, central banks stand at a crossroads, and this book provides an invaluable guide. In it, a diverse set of academic and central bank contributors survey both the past achievements of inflation targeting as well as future challenges, including re-examining the role of asset prices in formulating monetary policy.' Glenn Rudebusch, Federal Reserve Bank of San Francisco 'A valuable collection of thoughtful and up-to-date views on all aspects of inflation targeting from an impressive group of experts.' David Miles, Monetary Policy Committee, Bank of EnglandList of figures; List of tables; 1. Introduction David Cobham, Oyvind Eitrheim, Stefan Gerlach and Jan Qvigstad; 2. Welcome remarks: a Norwegian perspective Jan F. Qvigstad; 3. Reflections on inflation targeting Athanasios Orphanides; 4. Inflation targeting at 20: achievements and challenges Scott Roger; 5. Inflation targeting twenty years on: where, when, why, with what effects, what lies ahead? Klaus Schmidt-Hebbel; 6. How did we get to inflation targeting and where do we need to go to now? A perspective from the US experience Daniel L. Thornton; 7. Inflation control around the world: why are some countries more successful than others? Thorarinn G. Petursson; 8. Targeting inflation in Asia and the Pacific: lessons from the recent past Andrew Filardo and Hans Genberg; 9. Inflation targeting and asset prices Christopher Allsopp; 10. The optimal monetary policy instrument, inflation versus asset price targeting, and financial stability Charles Goodhart, Carolina Osorio and Dimitrios Tsomocos; 11. Expectations, deflation traps and macroeconomic policy George Evans and Seppo Honkapohja; 12. Heterogeneous expectations, learning and European inflation dynamics Anke Weber; 13. Inflation targeting and private sector forecasts Stephen Cecchetti and Craig Hakkio; 14. Inflation targeting, transparency and inflation forecasts: evidence from individual forecasters Christopher Crowe; 15. Gauging the effectiveness of quantitative forward guidance: evidence from three inflation targeters Magnus Andersson and Boris Hofmann; 16. Macro modelling with many models Ida Wolden Bache, James Mitchell, Francesco Ravazzolo and Shaun P. Vahey; 17. Have crisis monetary policy initiatives jeopardised central bank independence? Charles Goodhart; 18. Inflation targeting: learning the lessons from the financial crisis Spencer Dale; 19. The financial crisis as an opportunity to strengthen inflation targeting frameworks Hans Genberg; 20. Leaning against the wind is fine, but will often not be enough Lars Heikensten; 21. Inflation targeting, capital requirements and 'leaning against the wind': some comments Sushil Wadhwani; Index.