A Model for Full-Fledged Inflation Targeting and Application to Ghana
AbstractA model in which monetary policy pursues full-fledged inflation targeting adapts well to Ghana. Model features include: endogenous policy credibility; non-linearities in the inflation process; and a policy loss function that aims to minimize the variability of output and the interest rate, as well as deviations of inflation from the long-term low-inflation target. The optimal approach from initial high inflation to the ultimate target is gradual; and transitional inflation-reduction objectives are flexible. Over time, as policy earns credibility, expectations of inflation converge towards the long-run target, the output-inflation variability tradeoff improves, and optimal policy responses to shocks moderate.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 10/25.
Date of creation: 01 Jan 2010
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This paper has been announced in the following NEP Reports:
- NEP-AFR-2010-03-28 (Africa)
- NEP-ALL-2010-03-28 (All new papers)
- NEP-CBA-2010-03-28 (Central Banking)
- NEP-MAC-2010-03-28 (Macroeconomics)
- NEP-MON-2010-03-28 (Monetary Economics)
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