Inflation targeting is a monetary-policy strategy that was introduced in New Zealand in 1990, has been very successful in terms of stabilizing both inflation and the real economy, and as of 2007 had been adopted by more than 20 industrialized and nonindustrialized countries. It is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has been called ‘inflation-forecast targeting’, and a high degree of transparency and accountability.
KeywordsAccountability Central banking Central banks Consumer price index Core consumer price index Credibility Fixed exchange rates Flexible exchange rates Flexible inflation targeting Forecast targeting Forecasting Inflation expectations Inflation targeting Liquidity trap Monetary policy Monetary policy instrument Monetary policy rules Monetary transmission mechanism Money supply Money-growth targeting Optimal instrument-rate paths Output gap Potential output Price stability Price-level targeting Stabilization policy Transparency Unit root
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