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The level of the inflation target – a review of the issues

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  • Apel, Mikael
  • Armelius, Hanna
  • Claussen, Carl Andreas

Abstract

Most developed countries that conduct inflation targeting have chosen a target level at or close to 2 per cent. Recently, an international debate has arisen on whether this level should be increased. In this article, we review both the arguments in the more policy-oriented debate on the level of the inflation target and what academic research says about the optimal rate of inflation. One conclusion is that the threshold for increasing the target is high, primarily because there are significant practical problems linked to abandoning a target that is already established and changing to another one. The article also discusses the challenges that central banks can face in the near term as regards achieving their current targets.

Suggested Citation

  • Apel, Mikael & Armelius, Hanna & Claussen, Carl Andreas, 2017. "The level of the inflation target – a review of the issues," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 2, pages 36-56.
    • Handle: RePEc:zbw:espost:234500
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    References listed on IDEAS

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    Cited by:

    1. Armelius, Hanna & Boel, Paola & Claussen, Carl Andreas & Nessén, Marianne, 2018. "The e-krona and the macroeconomy," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 3, pages 43-65.

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    More about this item

    Keywords

    Monetary policy; Level of inflation target;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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