Targeting core inflation in emerging market economies

Stellenbosch Working Paper Series No. WP23/2014
 
Publication date: 2014
 
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
 
Abstract:

The pre-crisis monetary policy consensus has been challenged on a number of fronts. Even the nominal target, around which the modern consensus developed, has been called into question, with a vigorous recent debate ensuing about nominal income targeting as an alternative. This paper contributes to the controversy by arguing that one important reform of inflation-targeting regimes that deserves more attention is reformulating their targets explicitly in terms of core inflation. Core inflation targeting has a better theoretical grounding from both welfare economics and business cycle perspectives, holds practical advantages for inflation-targeting central banks, and has the promising feature of improving the frankness and accountability of monetary policy.

 
JEL Classification:

E31, E52, E58

Keywords:

Inflation, Core inflation, Inflation-targeting, Monetary policy

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BER Weekly

17 February 2020
Last Thursday, President Ramaphosa delivered his State of the Nation address (Sona) to parliament. The statement gave recognition to the economic challenges SA currently face, especially regarding electricity supply. More emphasis was placed on the role of the private sector to help solve these challenges. Read more in the Current affairs section. On...

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