Disagreement About Future Inflation: Understanding the Benefits of Inflation Targeting and Transparency

We estimate the determinants of disagreement about future inflation in a large and diversesample of countries, focusing on the role of monetary policy frameworks. We offer novelinsights that allow us to reconcile mixed findings in the literature on the benefits of inflationtargeting regimes and central bank transparency. The reduction in disagreement that followsthe adoption of inflation targeting is entirely due to increased central bank transparency.Since the benefits of increased transparency are non-linear, the gains from inflation targetingadoption have accrued mainly to countries that started from a low level of transparency.These have tended to be developing countries.