Advanced Search
MyIDEAS: Login to save this article or follow this journal

Inflation Targeting: It'S Not Broke, It Doesn'T Need Fixing, But Can It Survive?

Contents:

Author Info

  • PIERRE L. SIKLOS

    ()
    (Department of Economics, Wilfrid Laurier University and Viessmann European Research Centre, Waterloo, ON, N2L 3C5, Canada)

Abstract

Until the end of 2005 there were few outward signs that the inflation targeting (IT) monetary policy strategy was deemed fragile or that the likelihood of abandoning it was high. In light of the severe economic downturn and the global financial crisis that has afflicted most economies around the world since at least 2008, it is worth reconsidering the question of the fragility of the inflation targeting regime. This paper reprises the approach followed in Siklos (2008) but adds important new twists. For example, the present study asks whether the continued survival of IT is due to the fact that some of the central banks in question did take account of changes in financial stress. The answer is no. Indeed, many central banks are seen as enablers of rapid asset price increases. The lesson, however, is not that inflation targeting needs to be repaired. Instead, refinements should be considered to the existing inflation targeting strategy which has evolved considerably since it was first introduced in New Zealand 20 years ago. Most notably, there should be continued emphasis on inflation as the primary nominal anchor of monetary policy, especially in emerging market economies (EME), even if additional duties are assigned to central banks in response to recent events.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.worldscinet.com/cgi-bin/details.cgi?type=pdf&id=pii:S1793993310000081
Download Restriction: Access to full text is restricted to subscribers.

File URL: http://www.worldscinet.com/cgi-bin/details.cgi?type=html&id=pii:S1793993310000081
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Journal of International Commerce, Economics and Policy.

Volume (Year): 01 (2010)
Issue (Month): 01 ()
Pages: 59-80

as in new window
Handle: RePEc:wsi:jicepx:v:01:y:2010:i:01:p:59-80

Contact details of provider:
Web page: http://www.worldscinet.com/jicep/jicep.shtml

Order Information:
Email:

Related research

Keywords: Inflation targeting; monetary policy; fragility of policy regime; E42; E58;

Find related papers by JEL classification:

References

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.:
as in new window
  1. Frederic S. Mishkin, 2007. "Monetary Policy Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262134829, December.
  2. N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc.
  3. Robert H. Rasche & Marcela M. Williams, 2007. "The effectiveness of monetary policy," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 447-490.
  4. Flood, Robert P. & Rose, Andrew K., 2010. "Inflation targeting and business cycle synchronization," Journal of International Money and Finance, Elsevier, Elsevier, vol. 29(4), pages 704-727, June.
  5. repec:nbr:nberwo:12876 is not listed on IDEAS
  6. Benjamin M. Friedman, 2004. "Why the Federal Reserve Should Not Adopt Inflation Targeting," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 7(1), pages 129-136, 03.
  7. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  8. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 39(1), pages 195-214, December.
  9. King, Mervyn, 1997. "Changes in UK monetary policy: Rules and discretion in practice," Journal of Monetary Economics, Elsevier, Elsevier, vol. 39(1), pages 81-97, June.
  10. Pierre L. Siklos, 2008. "Inflation Targeting Around the World," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 44(6), pages 17-37, November.
  11. Charles Freedman & Douglas Laxton, 2009. "Why Inflation Targeting?," IMF Working Papers 09/86, International Monetary Fund.
  12. Siklos,Pierre L., 2002. "The Changing Face of Central Banking," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521780254.
  13. Robert Amano & Paul Fenton & David Tessier & Simon van Norden, 1996. "The credibility of monetary policy: a survey of the literature with some simple applications to Caanda," Meeting papers, EconWPA 9610001, EconWPA.
  14. Blackburn, Keith & Christensen, Michael, 1989. "Monetary Policy and Policy Credibility: Theories and Evidence," Journal of Economic Literature, American Economic Association, vol. 27(1), pages 1-45, March.
  15. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(4), pages 518-29, October.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wsi:jicepx:v:01:y:2010:i:01:p:59-80. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.