Advanced Search
MyIDEAS: Login to save this paper or follow this series

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. Batini, Nicoletta & Yates, Anthony, 2003. " Hybrid Inflation and Price-Level Targeting," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 35(3), pages 283-300, June.
  2. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, Elsevier, vol. 41(6), pages 1111-1146, June.
  3. 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.
  4. Nessén, Marianne & Vestin, David, 2000. "Average Inflation Targeting," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 119, Sveriges Riksbank (Central Bank of Sweden).
  5. Söderström, Ulf, 1999. "Should central banks be more aggressive?," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 84, Sveriges Riksbank (Central Bank of Sweden).
  6. Lars E. O. Svensson, 1997. "Inflation Targeting: Some Extensions," NBER Working Papers 5962, National Bureau of Economic Research, Inc.
  7. John C. Williams, 1999. "Simple rules for monetary policy," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1999-12, Board of Governors of the Federal Reserve System (U.S.).
  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. Brian Sack, 1998. "Does the Fed act gradually? a VAR analysis," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-17, Board of Governors of the Federal Reserve System (U.S.).
  10. Woodford, M., 1999. "Optimal Monetary Policy Inertia.," Papers, Stockholm - International Economic Studies 666, Stockholm - International Economic Studies.
  11. Vestin, David, 2000. "Price-level Targeting versus Inflation Targeting in a Forward-looking Model," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 106, Sveriges Riksbank (Central Bank of Sweden).
  12. Soderstrom, Ulf, 2002. " Monetary Policy with Uncertain Parameters," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 104(1), pages 125-45.
  13. Orphanides, Athanasios & Wieland, Volker, 2000. "Inflation zone targeting," European Economic Review, Elsevier, Elsevier, vol. 44(7), pages 1351-1387, June.
  14. Andrew G Haldane, 1997. "Designing Inflation Targets," RBA Annual Conference Volume, Reserve Bank of Australia, in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
  15. Sack, Brian, 2000. "Does the fed act gradually? A VAR analysis," Journal of Monetary Economics, Elsevier, Elsevier, vol. 46(1), pages 229-256, August.
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. Orphanides, Athanasios, 2001. "Monetary policy rules, macroeconomic stability and inflation: a view from the trenches," Working Paper Series, European Central Bank 0115, European Central Bank.
  2. Sam Warburton & Kirdan Lees, 2005. "A happy "halfway-house"? Medium term inflation targeting in New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2005/03, Reserve Bank of New Zealand.
  3. Athanasios Orphanides, 2003. "Historical monetary policy analysis and the Taylor rule," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2003-36, Board of Governors of the Federal Reserve System (U.S.).
  4. Richard Mash, 2003. "New Keynesian Microfoundations Revisited: A Calvo-Taylor-Rule-of-Thumb Model and Optimal Monetary Policy Delegation," Economics Series Working Papers, University of Oxford, Department of Economics 174, University of Oxford, Department of Economics.
  5. Nessén, Marianne & Vestin, David, 2000. "Average Inflation Targeting," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 119, Sveriges Riksbank (Central Bank of Sweden).
  6. Smets, Frank, 2000. "What horizon for price stability," Working Paper Series, European Central Bank 0024, European Central Bank.
  7. Dillén, Hans, 2002. "Inflation Targeting and the Dynamics of the Transmission Mechanism," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 141, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jul 2004.
  8. Söderström, Ulf & Söderlind, Paul & Vredin, Anders, 2002. "Can a Calibrated New-Keynesian Model of Monetary Policy Fit the Facts?," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 140, Sveriges Riksbank (Central Bank of Sweden).

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.