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Volume 58, Issue 9 -10

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Hits and Misses: Ten Years of Czech Inflation Targeting (Introduction)

Bulíř, Aleš; Čihák, Martin; Šmídková, Kateřina

Year: 2008   Volume: 58   Issue: 9 -10   Pages: 398-405

Abstract: The first 10 years of Czech Republic's inflation targeting regime have been remarkable by the persistent undershooting of the inflation targets. This article is an introduction to a special issue aimed at analyzing the factors of the undershooting. The articles in this issue explore the following hypotheses: the impact of a series of counter-inflationary shocks; a biased forecasting system; a faulty decision-making system; and the role of inflation expectations. Based on a "meta-analysis" of the articles, this introduction suggests that the undershooting cannot be explained by a single factor, although counter-inflationary shocks are identified most frequently. The impact of the undershooting on central bank credibility was modest, partly because the forecasts were accompanied by explicit discussions of the forecast risks.

JEL classification: E52, E58, E31, E47

Keywords: inflation targeting, forecasting system, inflation expectations

RePEc: http://ideas.repec.org/a/fau/fauart/v58y2008i9-10p398-405.html

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