Adopting inflation target can create higher inflation – paper

The Bank of Korea

Inflation targeting central banks appear to be tempted to move the target when inflation increases more than expected, a working paper published on December 18 by the Bank of Korea finds.

Endogeneity of inflation target by Soyoung Kim and Geunhyung Yim finds there is a positive and significant relationship between the inflation target in the next period and the current level of inflation, suggesting some sort of endogenous mechanism at work.

The authors note earlier studies have struggled to pro