Background Paper: The Monetary Frameworks of Four Inflation-Targeting Countries

In the 1990s, a number of countries adopted explicit inflation targets as the goal of monetary policy, following the example of New Zealand and Canada.1 The targets were introduced to make more concrete the authorities’ commitment to achieve and maintain low rates of inflation in their economies. This paper provides a brief overview of the inflation-targeting programs of four countries—New Zealand, Canada, the United Kingdom, and Sweden—as background for this conference’s round-table session. It discusses the circumstances and motivation for the adoption of the targets, as well as the main characteristics of the targets and how they have affected the accountability of the monetary authorities. Country experiences are reviewed in the chronological order of the adoption of the inflation targets. The concluding section outlines the common features of the particular monetary frameworks, which are summarized in Table 1, and reports on the monetary authorities’ success in keeping inflation within the target ranges.