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How did we get to inflation targeting and where do we need to go to now? a perspective from the U.S. experience

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Author Info

  • Daniel L. Thornton

Abstract

The Federal Reserve is not formally inflation targeting. Nevertheless, it is commonly believed to be an implicit inflation targeter. The evolution to inflation targeting occurred because central banks, most importantly the Federal Reserve, demonstrated that monetary policy could control inflation. As central banks’ credibility for keeping inflation low increased, policy actions became increasingly focused on affecting the growth rate of employment or the unemployment rate. The author argues that this change in emphasis is unlikely to generate positive benefits; more importantly, it endangers the continued effectiveness, and perhaps even the viability, of inflation targeting.

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File URL: http://research.stlouisfed.org/publications/review/12/01/65-82Thornton.pdf
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Bibliographic Info

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

Volume (Year): (2012)
Issue (Month): Jan ()
Pages: 65-81

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Handle: RePEc:fip:fedlrv:y:2012:i:jan:p:65-81:n:v.94no.1

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Related research

Keywords: Inflation targeting ; Monetary policy - United States;

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. Massimo Guidolin & Daniel L. Thornton, 2008. "Predictions of short-term rates and the expectations hypothesis of the term structure of interest rates," Working Paper Series 977, European Central Bank.
  2. D''Agostino, Antonello & Giannone, Domenico & Surico, Paolo, 2007. "(Un)Predictability and Macroeconomic Stability," CEPR Discussion Papers 6594, C.E.P.R. Discussion Papers.
  3. Katharine Neiss & Edward Nelson, 2002. "Inflation dynamics, marginal cost, and the output gap: evidence from three countries," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  4. Jonas D. M. Fisher & Chin Te Liu & Ruilin Zhou, 2002. "When can we forecast inflation?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 32-44.
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Cited by:
  1. Domenico Colucci & Vincenzo Valori, 2012. "Bounded rationality and parameters’ uncertainty in a simple monetary policy model," DiMaD Working Papers 2012-03, Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze.

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