Discussion Paper Details

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Title: What Should the Inflation Target Be? Views from 600 Economists

Author(s): Gene Ambrocio, Andrea Ferrero, Esa Jokivuolle and Kim Ristolainen

Publication Date: May 2022

Keyword(s): expert survey, inflation target and monetary policy

Programme Area(s): Monetary Economics and Fluctuations

Abstract: In a survey of more than 600 economists, most respondents prefer their central bank to have an explicit inflation target. Roughly half want the central bank to keep its current target. Two thirds of the rest want to raise the target, with a median preferred change of one percentage point. In a hypothetical scenario in which the central bank has no prior history of inflation targeting, an additional 12% of the respondents would prefer a different (typically higher) target than the current one. This result suggests that the costs of changing the current target hold some respondents back from wanting an actual target change. Respondents who are worried about the central bank credibility are less likely to support a target raise. Conversely, preference for a target raise is more likely to come from those who are concerned about the zero lower bound on the nominal interest rate. The average estimate of the equilibrium real interest rate in the sample is 0.6%. However, personal views about the equilibrium real interest rate do not predict a preference for a target raise.

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Bibliographic Reference

Ambrocio, G, Ferrero, A, Jokivuolle, E and Ristolainen, K. 2022. 'What Should the Inflation Target Be? Views from 600 Economists'. London, Centre for Economic Policy Research.