Abstract
The first 10 years of Czech Republic's inflation targeting regime have been remarkable by the persistent undershooting of the inflation targets. This article is an introduction to a special issue aimed at analyzing the factors of the undershooting.
The articles in this issue explore the following hypotheses: the impact of a series of counter-inflationary shocks; a biased forecasting system; a faulty decision-making system; and the role of inflation expectations. Based on a "meta-analysis" of the articles, this introduction suggests that the undershooting cannot be explained by a single factor, although counter-inflationary shocks are identified most frequently.
The impact of the undershooting on central bank credibility was modest, partly because the forecasts were accompanied by explicit discussions of the forecast risks.