Testing the transparency benefits of inflation targeting: Evidence from private sector forecasts

Abstract

Using inflation forecast data for 11 IT adoption countries, IT adoption is found to promote convergence in forecast errors, suggesting that it enhances transparency. This result, which is subjected to several robustness checks and found to be robust, supports Morris and Shin's (2002) contention that better public information is most beneficial for forecasters with bad private information. However, it does not support their hypothesis that better public information could make private forecasts less accurate. © 2010 International Monetary Fund.