An International Comparative Research on the Inflation Targeting Policy ; Whether It Is Valid under the Deflation?

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The inflation targeting has been adapted by the many countries over the world. Though it was advocated as a special policy operation against the deflation in Japan, it is close to the world standard of the monetary policy operation in reality. This research project aims to research on the experiences of the inflation targeting policy in countries and to examine its applicability onto Japan. The followings are our major findings.1)There have been variations in the design of the inflation targeting among the countries but, after a decade of experiences, the common trend has emerged towards the inflation targeting as the "flexible framework" for the monetary policy operation. The typical example is New Zealand, where the rigid rules and accounting system were introduced initially but the recent reform changed it towards the "flexible framework". Other countries are mostly in the same direction and the academic researches basically support that trend.2)The inflation-targeting countries hav … More e expanded the limit in the policy information disclosure. In this point, there has been no reverse trend. The current frontrunners exhibit their main economic models and implement the "peer review" of the total policy-making process. This trend is supported by the theoretical works and is followed by the developing countries like Thailand. The European Central Bank is exceptionally restricted in this regard, since its policy making body includes the representatives from the different countries.3)The Swedish monetary policy operation is often mentioned as the rare success example against the deflation in the Great Depression era. However, its adoption of the priceKievel target is followed shortly after by the adoption of the British-Pound peg policy. Thus, the consistency and the validity of its price-level targeting should be re-examined more carefully.4)The empirical part of the research project showed that the traditional quantity indicator, M2+CD lost its information content for economic forecasts in the late 1990s, and examined its causes. The theoretical parts showed that the policy-making by the committee, which is common among the inflation-targeting countries, might leads to the excessively cautious decisions, and that the interest-rate control is a valid tool in the inflation targeting. Less