Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152998
Authors: 
Diron, Marie
Mojon, Benoît
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 564
Abstract: 
This paper first shows that the forecast error incurred when assuming that future inflation will be equal to the inflation target announced by the central bank is typically at least as small and often smaller than forecast errors of model-based and published inflation forecasts. It then shows that there are substantial benefits in having rule-of-thumb agents who simply trust that the central bank will deliver its pre-announced inflation objective.
Subjects: 
credibility
inflation forecast
inflation targeting
monetary policy
JEL: 
E5
Document Type: 
Working Paper

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