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

Inflation Targeting Under Potential Output Uncertainty

Contents:

Author Info

  • Victor Gaiduch
  • Ben Hunt
Registered author(s):

    Abstract

    To achieve their price stability objectives, many monetary authorities use the gap between current and potential output as an indicator of future price pressures. This policy-setting strategy has been criticized because potential output estimates have a high degree of uncertainty. In this paper, estimates of potential output uncertainty in New Zealand are used to examine the output gap’s usefulness. The results suggest that although output gap uncertainty leads to more inflation and output variability, policy based directly and/or indirectly on the output gap leads to better macroeconomic stability than policy based only on observable inflation and output growth.

    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.imf.org/external/pubs/cat/longres.aspx?sk=3793
    Download Restriction: no

    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/158.

    as in new window
    Length: 29
    Date of creation: 01 Oct 2000
    Date of revision:
    Handle: RePEc:imf:imfwpa:00/158

    Contact details of provider:
    Postal: International Monetary Fund, Washington, DC USA
    Phone: (202) 623-7000
    Fax: (202) 623-4661
    Email:
    Web page: http://www.imf.org/external/pubind.htm
    More information through EDIRC

    Order Information:
    Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

    Related research

    Keywords: Inflation targeting; Production; inflation; monetary policy; monetary policy rules; nominal interest rate; monetary authority; real output; aggregate demand; price stability; macroeconomic stability; monetary fund; inflation process; monetary policy rule; rational expectations; inflation forecasts; rate of inflation; relative prices; wage inflation; price inflation; range of inflation; inflation targeting framework; lower inflation; coefficient on inflation; inflationary consequences; terms of trade; monetary authorities; nominal interest rates; relative price; real variables;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

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

    Cited by:
    1. Michael Ehrmann and Frank Smets, 2001. "Uncertain Potential Output: Implications for Monetary Policy," Computing in Economics and Finance 2001, Society for Computational Economics 8, Society for Computational Economics.
    2. Benjamin Hunt & Douglas Laxton, 2004. "The Zero Interest Rate Floor (ZIF) and its Implications for Monetary Policy in Japan," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 187(1), pages 76-92, January.
    3. Nadia Saleem, 2010. "Adopting Inflation Targeting in Pakistan: An Empirical Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, Department of Economics, The Lahore School of Economics, vol. 15(2), pages 51-76, Jul-Dec.
    4. Gonzalo Llosa/Shirley Miller, 2004. "Using additional information in estimating output gap in Peru: a multivariate unobserved component approach," Econometric Society 2004 Latin American Meetings, Econometric Society 243, Econometric Society.
    5. L Christopher Plantier & Dean Scrimgeour, 2002. "Estimating a Taylor Rule for New Zealand with a time-varying neutral real rate," Reserve Bank of New Zealand Discussion Paper Series DP2002/06, Reserve Bank of New Zealand.
    6. Jean-Philippe Cayen & Simon van Norden, 2002. "La fiabilité des estimations de l'écart de production au Canada," Working Papers, Bank of Canada 02-10, Bank of Canada.
    7. Gonzalo Llosa & Shirley Miller, 2005. "Using additional information in estimating the output gap in Peru: a multivariate unobserved component approach," Working Papers, Banco Central de Reserva del Perú 2005-004, Banco Central de Reserva del Perú.

    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:imf:imfwpa:00/158. 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: (Jim Beardow) or (Hassan Zaidi).

    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.