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Inflation Targeting: A New Framework for Monetary Policy?

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Author Info
Bernanke, Ben S
Mishkin, Frederic S

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Abstract

In recent years, a number of industrialized countries have adopted a strategy for monetary policy known as 'inflation targeting.' The authors describe how this approach has been implemented in practice and argue that it is best understood as a broad framework for policy, which allows the central bank 'constrained discretion,' rather than as an ironclad policy rule in the Friedman sense. They discuss the potential of the inflation-targeting approach for making monetary policy more coherent and transparent and for increasing monetary policy discipline. The authors' final section addresses some additional practical issues raised by this approach. Copyright 1997 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 11 (1997)
Issue (Month): 2 (Spring)
Pages: 97-116
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Handle: RePEc:aea:jecper:v:11:y:1997:i:2:p:97-116

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Erica L. Groshen & Mark E. Schweitzer, 1996. "The effects of inflation on wage adjustments in firm-level data: grease or sand?," Staff Reports 9, Federal Reserve Bank of New York. [Downloadable!]
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  2. Svensson, L-E-O, 1996. "Price Level Targeting vs Inflation Targeting : A free Lunch?," Papers 614, Stockholm - International Economic Studies.
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  3. Moulton, Brent R, 1996. "Bias in the Consumer Price Index: What Is the Evidence?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 159-77, Fall. [Downloadable!] (restricted)
  4. McCallum, Bennett T., 1997. "Crucial issues concerning central bank independence," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 99-112, June. [Downloadable!] (restricted)
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  5. Bennett T. McCallum, 1998. "Inflation Targeting in Canada, New Zealand, Sweden, the United Kingdom, and in General," NBER Working Papers 5579, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. David E. Lebow & John M. Roberts & David J. Stockton, 1992. "Economic performance under price stability," Working Paper Series / Economic Activity Section 125, Board of Governors of the Federal Reserve System (U.S.).
  7. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Robert E. Hall & N. Gregory Mankiw, 1994. "Nominal Income Targeting," NBER Chapters, in: Monetary Policy, pages 71-94 National Bureau of Economic Research, Inc. [Downloadable!]
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  10. Lars E. O. Svensson, 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," NBER Working Papers 5797, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Charles Goodhart & José Viñals, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," Banco de España Working Papers 9425, Banco de España.
  12. Robert J. Shiller, 1996. "Why Do People Dislike Inflation?," Cowles Foundation Discussion Papers 1115, Cowles Foundation, Yale University. [Downloadable!]
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  13. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Working Papers in Applied Economic Theory 94-05, Federal Reserve Bank of San Francisco.
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  14. Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-28, November. [Downloadable!] (restricted)
  15. Charles Goodhart & José Viñals, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," Banco de España Working Papers 9425, Banco de España.
  16. Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December. [Downloadable!] (restricted)
  17. Svensson, Lars E O, 1997. "Optimal Inflation Targets, "Conservative" Central Banks, and Linear Inflation Contracts," American Economic Review, American Economic Association, vol. 87(1), pages 98-114, March. [Downloadable!] (restricted)
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  18. Frederic S. Mishkin, 1991. "Asymmetric Information and Financial Crises: A Historical Perspective," NBER Chapters, in: Financial Markets and Financial Crises, pages 69-108 National Bureau of Economic Research, Inc. [Downloadable!]
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  19. Ben Bemanke & Harold James, 1991. "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," NBER Chapters, in: Financial Markets and Financial Crises, pages 33-68 National Bureau of Economic Research, Inc. [Downloadable!]
  20. Thomas Laubach & Adam Posen, 1997. "Some comparative evidence on the effectiveness of inflation targeting," Research Paper 9714, Federal Reserve Bank of New York. [Downloadable!]
  21. Taylor, John B., 1985. "What would nominal GNP targetting do to the business cycle?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 22(1), pages 61-84, January. [Downloadable!] (restricted)
  22. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121. [Downloadable!] (restricted)
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  23. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November. [Downloadable!] (restricted)
  24. Bernanke, Ben S & Woodford, Michael, 1997. "Inflation Forecasts and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 653-84, November.
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  25. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1996-1), pages 1-76. [Downloadable!]
  26. José Viñals & Charles Goodhart, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," FMG Special Papers sp61, Financial Markets Group. [Downloadable!] (restricted)
  27. Matthew D. Shapiro & David W. Wilcox, 1997. "Mismeasurement in the Consumer Price Index: An Evaluation," NBER Working Papers 5590, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  28. Stephen G. Cecchetti, 1995. "Inflation Indicators and Inflation Policy," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 189-236 National Bureau of Economic Research, Inc. [Downloadable!]
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  29. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March. [Downloadable!] (restricted)
  30. Charles A. E. Goodhart & Jose Vinals, 1994. "Strategy an tactics of monetary policy: examples from Europe and the Antipodes," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 139-194. [Downloadable!]
  31. Michael Woodford, 1994. "Nonstandard Indicators for Monetary Policy: Can Their Usefulness Be Judged from Forecasting Regressions?," NBER Chapters, in: Monetary Policy, pages 95-115 National Bureau of Economic Research, Inc. [Downloadable!]
  32. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June. [Downloadable!] (restricted)
  33. Martin Feldstein, 1997. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Working Papers 5469, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  34. Adam S. Posen, 1995. "Declarations Are Not Enough: Financial Sector Sources of Central Bank Independence," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 253-274 National Bureau of Economic Research, Inc. [Downloadable!]
  35. Benjamin M. Friedman & Kenneth N. Kuttner, 1996. "A Price Target for U.S. Monetary Policy? Lessons from the Experience with Money Growth Targets," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1996-1), pages 77-146. [Downloadable!]
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  36. Bernanke, Ben S. & Mihov, Ilian, 1997. "What does the Bundesbank target?," European Economic Review, Elsevier, vol. 41(6), pages 1025-1053, June. [Downloadable!] (restricted)
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