Working Paper: CEPR ID: DP1941
Authors: Mike Artis; Paul Mizen; Zenon Kontolemis
Abstract: The establishment of the European Central Bank (ECB) presents a rare opportunity to define the operations of a central bank with no prior track record. Before the ECB specifies an, as yet undefined, operational target this paper asks what might be learnt from the recent experience of inflation targeting at the Bank of England. We consider whether there should be single or multiple targets and which, if any, of the existing inflation measures should be used. If inflation is targeted then a forecast of its value becomes the intermediate variable. This raises both the issue of transparency and the issue of providing a compensating supply of information material necessary to fill the gap, but too much ?openness? can also be problematic. The ECB must be accountable and the contracting approach may be useful, but being seen to ?say? and ?do? the same thing is ultimately of the most importance.
Keywords: Inflation targeting; Central bank accountability; Bank of England; ECB
JEL Codes: E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inflation targeting (E31) | central bank accountability (E58) |
| inflation targeting (E31) | transparency (G38) |
| inflation targeting (E31) | effectiveness of monetary policy measures (E52) |
| inflation forecasts (E31) | monetary policy (E52) |
| core inflation measure (E31) | monetary policy effectiveness (E52) |
| inflation targeting (E31) | choice of inflation measures (E31) |