Template-Type: ReDIF-Article 1.0
Author-Name: István Ábel
Author-Name: Orsolya Csortos
Author-Name: Kristóf Lehmann
Author-Name: Annamária Madarász
Author-Name: Zoltán Szalai
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: abeli@mnb.hu
Author-Email: csorotso@mnb.hu 
Title: Inflation targeting in the light of lessons from the financial crisis
Abstract: This paper surveys the changes triggered by the financial crisis and the theoretical
and practical options for the renewal of the inflation targeting framework. While a
comprehensive overview would be impossible to provide, it seeks to present the changes
in the monetary strategy of Magyar Nemzeti Bank against this wider context. First, it
describes in brief the inflation targeting framework, its key elements and the principles of
how it operates in practice. The paper then explains criticisms of the inflation targeting
framework in light of the financial crisis and the practical, strategic and theoretical
innovations that these have led to. On this note, there follows a discussion of the options
most widely adopted as solutions to the challenges and what proposals were made but
never used. Finally, the paper provides an overview of the practical lessons learnt in recent
years regarding these instruments in advanced and emerging economies. International
experience demonstrates that inflation targeting continues to be one of the best practices
of monetary policy and that its transformation during the crisis reflects heightened interest
in considerations (e.g. financial stability) beyond the primary goal of the inflation target.
Rather than including greater flexibility in its goals, the changes to the earlier framework
of inflation targeting resulted in a transformed and augmented toolkit and institutional
system that may remain an integral part of monetary policy and central bank practice. To
prepare this survey for information purposes, the authors relied on working documents
produced by the Monetary Strategy Department at the Monetary Policy and Financial
Market Analysis Directorate of Magyar Nemzeti Bank
Classification-JEL: E42, E52, E58.
Keywords: forward guidance, inflation targeting, quantitative easing, unconventional
monetary policy, zero lower bound.
Journal: Financial and Economic Review  
Pages: 35-56
Volume: 13
Issue: 4
Year: 2014
File-URL: http://english.hitelintezetiszemle.hu/letoltes/2-abel-en.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:13:y:2014:i:4:p:35-56