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Article: New Zealand. (Part IV)(Inflation targeting: lessons from four countries.)
- Article from:
- Federal Reserve Bank of New York Economic Policy Review
- Article date:
- August 1, 1997
- Author:
CopyrightCOPYRIGHT 1997 Federal Reserve Bank of New York. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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New Zealand was the first country to adopt formal inflation targeting. In discussing its experience, we stress the following design choices and themes:
* Inflation targeting in New Zealand followed legislation that mandated a Policy Targets Agreement (PTA) between the elected government and the newly independent central bank, which resulted in a jointly decided numerical target for inflation.
* Inflation targeting was adopted only after a successful disinflation had largely taken place.
* Rather than using the headline consumer price index (CPI), the central bank uses a core-type price index to construct the inflation target variable; the ...