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Inflation targets and the benefits of an explicit tolerance band

Andersson, Fredrik, Jonung, Lars, (2017), “Inflation targets and the benefits of an explicit tolerance band”, Vox Eu, 8 Μαΐου

Since the early 1990s, a large number of central banks have adopted inflation targeting, with the operational goal for monetary policy commonly set as a single number. The official target for inflation is often combined with an explicit tolerance band within which inflation is allowed to fluctuate. In a recent survey, Hammond (2012) finds that 22 of 29 inflation-targeting central banks have such an explicit band. Notable exceptions are the ECB, the US Federal Reserve, the Bank of England, and the Swedish Riksbank.

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