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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1 March 2021
Even with the release of data showing a record high unemployment rate in 2020Q4, it turned out to be a fairly good week for the SA economy. Daily new COVID-19 infections remained well contained, while the second batch of 80 000 J&J vaccines arrived (albeit controversially with the grounded SAA being the carrier). In addition, relative to the October...

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