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Inflation Targets as a Stabilization Device

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  • Mahadeva, Lavan
  • Sterne, Gabriel

Abstract

In a New Keynesian macroeconomic model under credible commitment, price level targeting dominates inflation targeting. But with sufficient inflation aversion the inflation-targeting central bank can produce quantitatively similar results to one targeting the price level. The current degree of inflation aversion demonstrated by the Bank of England may be sufficient to reap the benefits of price level targeting. Copyright 2002 by Blackwell Publishers Ltd and The Victoria University of Manchester

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Bibliographic Info

Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 70 (2002)
Issue (Month): 4 (Special Issue)
Pages: 619-50

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Handle: RePEc:bla:manchs:v:70:y:2002:i:4:p:619-50

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Cited by:
  1. Julian A. Parra-Polania, 2012. "Transparency: can central banks commit to truthful communication?," BORRADORES DE ECONOMIA 009614, BANCO DE LA REPÚBLICA.
  2. Gabriel Sterne, 2002. "Inflation Targets in a Global Context," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 2, pages 023-078 Central Bank of Chile.
  3. Rodrigo Caputo, 2004. "Exchange Rates, Inflation and Monetary Policy Objectives in Open Economies: The Experience of Chile," Econometric Society 2004 Latin American Meetings 298, Econometric Society.
  4. Rodrigo Caputo, 2009. "External Shocks and Monetary Policy. Does it Pay to Respond to Exchange Rate Desviations?," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 24(1), pages 55-99, Junio.
  5. Felipe Morandé L., 2001. "A Decade of Inflation Targeting in Chile: Developments, Lessons, and Challenges," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 4(1), pages 35-62, April.
  6. Felipe Morandé & Klaus Schmidt-Hebbel, 2000. "Chile's Peso: Better than (Just) Living with the Dollar?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(110), pages 177-226.
  7. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
  8. J. Benson Durham, 2001. "Sacrifice ratios and monetary policy credibility: do smaller budget deficits, inflation-indexed debt, and inflation targets lower disinflation costs?," Finance and Economics Discussion Series 2001-47, Board of Governors of the Federal Reserve System (U.S.).
  9. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2001. "Does it pay to be transparent? International evidence from central bank forecasts," Bank of England working papers 143, Bank of England.
  10. Javier Gómez & José Darío Uribe & Hernando Vargas, 2002. "The Implementation Of Inflation Targeting In Colombia," BORRADORES DE ECONOMIA 003603, BANCO DE LA REPÚBLICA.
  11. Lavan Mahadeva and Paul Robinson, 2004. "Unit Root Testing in a Central Bank," Handbooks, Centre for Central Banking Studies, Bank of England, number 22.
  12. Lucía Cuadro Sáez & Sonsoles Gallego Herrero & Alicia García Herrero, 2003. "Why Do Countries Develop More Financially Than Others? The Role Of The Central Bank And Banking Supervision," Finance 0304006, EconWPA.
  13. Javier Gómez & José Darío Uribe & Hernando Vargas, . "The Implementation of Inflation Targeting in Colombia," Borradores de Economia 202, Banco de la Republica de Colombia.

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