Inflation Targeting and Central Bank Behavior
- Topics:
- Inflation
- Source:
- Center for Financial Studies
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Overview: The article states that inflation targeting mandates the single-minded, rule-like pursuit of price stability without regard for other policy objectives, to others, inflation targeting represents nothing more than the latest version of cheap talk by central banks unable to sustain monetary commitments. Advocates of inflation targeting, including the adopting central banks themselves, have expressed the view that the efforts at transparency and communication in the inflation targeting framework grant the central bank greater short-run flexibility in pursuit of its long-run inflation goal. This paper identifies five distinct interpretations of inflation targeting, consistent with various strands of the current literature, and relates those interpretations to a conventional model of monetary policy in which time consistency is a problem.
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Format: PDF | Size: 140KB | Date: Jan 1999 | Pages: 51
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