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Inflation targets and inflation targeting

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  • Laurence H. Meyer
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    Abstract

    The Federal Reserve currently has a dual mandate: promote price stability and full employment. In a speech presented at the University of California at San Diego Economic Roundtable, Laurence Meyer explores two policy options that would change the current framework. Meyer discusses whether the United States should (i) move to an inflation-targeting regime (placing primary emphasis on price stability) or (ii) set an explicit numerical target for inflation within the context of the current dual mandate.> For background, he describes an inflationtargeting regime, reviews various mandates> around the world, and discusses common elements and differences among the regimes.> He then explores each option. Because the first option may reduce the flexibility of monetary policy too stringently, it is determined to be undesirable. The second option would, in the author’s opinion, give added precision to an already mandated objective because it would improve transparency and accountability of the Fed, anchor inflation expectations and increase the Fed’s credibility, and institutionalize good monetary policy. The steps necessary to implement the preferred option are outlined.

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    File URL: http://research.stlouisfed.org/publications/review/01/11/1-14Meyer.pdf
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    Bibliographic Info

    Article provided by Federal Reserve Bank of St. Louis in its journal Review.

    Volume (Year): (2001)
    Issue (Month): Nov. ()
    Pages: 1-14

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    Handle: RePEc:fip:fedlrv:y:2001:i:nov.:p:1-14:n:v.83no.6

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    Related research

    Keywords: Inflation (Finance) ; Monetary policy;

    References

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    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.:
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    1. Svensson, Lars, 1999. "How Should Monetary Policy Be Conducted in an Era of Price Stability," Seminar Papers 680, Stockholm University, Institute for International Economic Studies.
    2. Andrew T.. Levin & Volker Wieland & John Williams, 1999. "Robustness of Simple Monetary Policy Rules under Model Uncertainty," NBER Chapters, in: Monetary Policy Rules, pages 263-318 National Bureau of Economic Research, Inc.
    3. Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-34.
    4. Stephen G. Cecchetti & Michael Ehrmann, 2002. "Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 9, pages 247-274 Central Bank of Chile.
    5. 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(1), pages 1-76.
    6. Ann-Charlotte Eliasson & Peter Isard & Douglas Laxton, 1999. "Simple Monetary Policy Rules Under Model Uncertainty," IMF Working Papers 99/75, International Monetary Fund.
    7. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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    Cited by:
    1. Eckhard Hein, 2002. "Monetary policy and wage bargaining in the EMU: restrictive ECB policies, high unemployment, nominal wage restraint and inflation above the target," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 299-337.
    2. António Portugal Duarte, 2005. "The Portuguese Disinflation Process: Analysis of Some Costs and Benefits," International Finance 0504005, EconWPA.
    3. Eckhard Hein & Torsten Niechoj, 2005. "Leitlinien für ein dauerhaftes Wachstum in der EU? Konzept und Wirkung der Grundzüge der Wirtschaftspolitik," Macroeconomics 0501008, EconWPA.
    4. Lars E. O. Svensson, 2003. "Monetary Policy and Real Stabilization," NBER Working Papers 9486, National Bureau of Economic Research, Inc.
    5. repec:ltr:wpaper:2005.02 is not listed on IDEAS
    6. Baltensperger, Ernst & Fischer, Andreas M. & Jordan, Thomas J., 2007. "Strong goal independence and inflation targets," European Journal of Political Economy, Elsevier, vol. 23(1), pages 88-105, March.
    7. Øistein RØisland & Ragnar Torvik, 2003. "Optimum Currency Areas Under Inflation Targeting," Open Economies Review, Springer, vol. 14(2), pages 99-118, April.
    8. Leu, Shawn Chen-Yu & Sheen, Jeffrey, 2005. "Asymmetric Monetary Policy in Australia," Working Papers 2, University of Sydney, School of Economics.
    9. Mark R. Stone & Charles Frederick Kramer, 2005. "A Post-Reflation Monetary Framework for Japan," IMF Working Papers 05/73, International Monetary Fund.
    10. Nelson, Edward, 2003. "The Future of Monetary Aggregates in Monetary Policy Analysis," CEPR Discussion Papers 3897, C.E.P.R. Discussion Papers.

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