Advanced Search
MyIDEAS: Login

Targeting Inflation over the Short, Medium and Long Term

Contents:

Author Info

  • Nessén, Marianne

    ()
    (Research Department, Central Bank of Sweden)

Abstract

A central bank pursuing the policy of inflation targeting aims to keep inflation as close as possible to a pre-announced value. But which 'inflation' should this be? Quarterly, annual, biennial? In theoretical models it is typically inflation during one period. We analyze how changing the period over which the inflation rate is defined - i.e. changing central bank preferences - affects optimal monetary policy. It is shown that when targeting inflation is the sole objective of the central bank, more aggressive monetary policy results; but when output stabilization is also a concern, a 'longer-term view' typically leads to a more cautious conduct of monetary policy and less variability in output. The conditions under which inflation targeting in effect becomes price level targeting are also examined.

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.riksbank.com/upload/4248/WP_98.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://www.riksbank.com/upload/4248/WP_98.pdf [301 Moved Permanently]--> http://www.riksbank.se/en/upload/4248/WP_98.pdf). If this is indeed the case, please notify (Lena Löfgren)
Download Restriction: no

Bibliographic Info

Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 98.

as in new window
Length: 30 pages
Date of creation: 01 Nov 1999
Date of revision:
Publication status: Published in Journal of Macroeconomics, 2002, pages 313-329.
Handle: RePEc:hhs:rbnkwp:0098

Contact details of provider:
Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Phone: 08 - 787 00 00
Fax: 08-21 05 31
Email:
Web page: http://www.riksbank.com/
More information through EDIRC

Related research

Keywords: Inflation targeting; Price level targeting; Optimal monetary policy;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

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. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
  2. Orphanides, Athanasios & Wieland, Volker, 1999. "Inflation zone targeting," Working Paper Series 0008, European Central Bank.
  3. Woodford, M., 1999. "Optimal Monetary Policy Inertia.," Papers 666, Stockholm - International Economic Studies.
  4. Söderström, Ulf, 1999. "Should central banks be more aggressive?," Working Paper Series 84, Sveriges Riksbank (Central Bank of Sweden).
  5. John C. Williams, 2003. "Simple rules for monetary policy," Economic Review, Federal Reserve Bank of San Francisco, pages 1-12.
  6. Söderström, Ulf, 2000. "Monetary policy with uncertain parameters," Working Paper Series 0013, European Central Bank.
  7. Nessen, Marianne & Vestin, David, 2005. "Average Inflation Targeting," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 837-63, October.
  8. Julio J. Rotemberg & Michael Woodford, 1998. "Interest-Rate Rules in an Estimated Sticky Price Model," NBER Working Papers 6618, National Bureau of Economic Research, Inc.
  9. Nicoletta Batini & Anthony Yates, 2001. "Hybrid inflation and price level targeting," Bank of England working papers 135, Bank of England.
  10. Lars E. O. Svensson, 1997. "Inflation Targeting: Some Extensions," NBER Working Papers 5962, National Bureau of Economic Research, Inc.
  11. Vestin, David, 2000. "Price-level Targeting versus Inflation Targeting in a Forward-looking Model," Working Paper Series 106, Sveriges Riksbank (Central Bank of Sweden).
  12. Andrew G Haldane, 1997. "Designing Inflation Targets," RBA Annual Conference Volume, in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
  13. Sack, Brian, 2000. "Does the fed act gradually? A VAR analysis," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 229-256, August.
  14. Glenn D. Rudebusch, 2001. "Is The Fed Too Timid? Monetary Policy In An Uncertain World," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 203-217, May.
  15. Woodford, Michael, 1999. "Optimal monetary policy inertia," CFS Working Paper Series 1999/09, Center for Financial Studies (CFS).
  16. Brian Sack, 1998. "Does the Fed act gradually? a VAR analysis," Finance and Economics Discussion Series 1998-17, Board of Governors of the Federal Reserve System (U.S.).
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Dillén, Hans, 2002. "Inflation Targeting and the Dynamics of the Transmission Mechanism," Working Paper Series 141, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jul 2004.
  2. Söderström, Ulf & Söderlind, Paul & Vredin, Anders, 2002. "Can a Calibrated New-Keynesian Model of Monetary Policy Fit the Facts?," Working Paper Series 140, Sveriges Riksbank (Central Bank of Sweden).
  3. Orphanides, Athanasios, 2004. "Monetary Policy Rules, Macroeconomic Stability, and Inflation: A View from the Trenches," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 151-75, April.
  4. Lees, Kirdan & Warburton, Sam, 2010. "A happy "half way-house"? Medium term inflation targeting in New Zealand," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 819-839, September.
  5. Orphanides, Athanasios, 2003. "Historical monetary policy analysis and the Taylor rule," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 983-1022, July.
  6. Nessén, Marianne & Vestin, David, 2000. "Average Inflation Targeting," Working Paper Series 119, Sveriges Riksbank (Central Bank of Sweden).
  7. Smets, Frank, 2000. "What horizon for price stability," Working Paper Series 0024, European Central Bank.
  8. Richard Mash, 2003. "New Keynesian Microfoundations Revisited: A Calvo-Taylor-Rule-of-Thumb Model and Optimal Monetary Policy Delegation," Economics Series Working Papers 174, University of Oxford, Department of Economics.

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:hhs:rbnkwp:0098. 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: (Lena Löfgren).

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.