Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2010:17: Rational Expectations And Inflation Targeting -An Analysis For Ten Countries

Pia Fromlet ()
Additional contact information
Pia Fromlet: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: In this paper I evaluate inflation targeting for ten countries. The evaluation is based on unconditional as well as conditional measures of the variance of inflation around target. With strict inflation targeting, expectations of the future deviation from target given information about the deviation from the target today should be equal to zero. Using the Consumer Price Index (CPI) when calculating the inflation rate, I find that the null hypothesis can be rejected for six of ten countries. In an extended approach I add lagged output gap as an information variable for countries where data was available. I then get the result that rational expectations and strict inflation targeting can be rejected for five countries. Out of the ten countries, the United Kingdom has conducted in‡ation targeting most in line with the theory of rational expectations and strict inflation targeting, and Poland the least.

Keywords: Inflation targeting; rational expectations; monetary policy

JEL-codes: E31; E52; E58

38 pages, September 17, 2010

Full text files

FULLTEXT02 PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Lovisa Isaksson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2019-01-15 07:35:23.