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Towards Inflation Targeting in Sri Lanka

This paper develops a practical model-based forecasting and policy analysis system (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulati...

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Bibliographic Details
Main Author: Ding, Ding
Other Authors: Anand, Rahul, Peiris, Shanaka
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2011
Series:IMF Working Papers
Subjects:
Inflation
Output Gap
Monetary Economics
Inflation Targeting
Deflation
Production
Currency
Macroeconomics: Production
Price Level
Foreign Exchange
Prices
Macroeconomics
Monetary Policy
Real Exchange Rates
Economic Theory
Exchange Rates
Money And Monetary Policy
Production And Operations Management
Sri Lanka
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper develops a practical model-based forecasting and policy analysis system (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulations suggest that an open-economy inflation targeting rule can reduce macroeconomic volatility and anchor inflationary expectations given the size and type of shocks faced by the economy. Sri Lanka could aim to target a broad inflation range initially due to its susceptibility supply-side shocks while enhancing exchange rate flexibility and strengthening the effectiveness of monetary policy in the transition to an inflation forecast targeting regime
Physical Description:28 pages
ISBN:9781455226078

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