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Inflation and Growth Targeting

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Author Info
Pui Chi Ip () (Department of Economics, Macquarie University)
Abstract

Inflation targeting needs to be supplemented by an economic growth target so that central banks will not adopt monetary policy which results in stagnation. There is no guarantee that the economy will move towards full employment by itself when the inflation rate is kept between two to three per cent. Monetary policy does not have a comparative advantage in achieving price stability. Svensson's proposal that the Keynesian interest rate channel and the Phillips curve can be exploited by the monetary authority for the purpose of inflation targeting may not work. The R in NAIRU should stand for "range" not "rate".

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File URL: http://www.econ.mq.edu.au/research/2004/IAGT260204MERP1.pdf
File Format: application/pdf
File Function: First Version, 2003; Revised Version, 2004
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Publisher Info
Paper provided by Macquarie University, Department of Economics in its series Research Papers with number 0401.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 24 pages.
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:mac:wpaper:0401

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Postal: Sydney NSW 2109
Web page: http://www.econ.mq.edu.au/
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Related research
Keywords: Inflation; Economic Growth; Monetary Policy;

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

References listed on IDEAS
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  1. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August. [Downloadable!] (restricted)
    Other versions:
  2. McDonald, Ian M, 2002. "Equilibrium Unemployment: Theory and Measurement in Australia Using the Phillips Curve," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 451-70, December. [Downloadable!] (restricted)
  3. Gordon, Robert J, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter. [Downloadable!] (restricted)
    Other versions:
  4. Galbraith, James K, 1997. "Time to Ditch the NAIRU," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 93-108, Winter. [Downloadable!] (restricted)
  5. Stock, James H. & Watson, Mark W., 1999. "Forecasting inflation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 293-335, October. [Downloadable!] (restricted)
    Other versions:
  6. Staiger, Douglas & Stock, James H & Watson, Mark W, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter. [Downloadable!] (restricted)
  7. A. J. Hagger & Nicolaas Groenewold, 2003. "Time to Ditch the Natural Rate?," The Economic Record, The Economic Society of Australia, vol. 79(246), pages 324-335, 09. [Downloadable!] (restricted)
  8. David Gruen & Adrian Pagan & Christopher Thompson, 1999. "The Phillips Curve in Australia," RBA Research Discussion Papers rdp1999-01, Reserve Bank of Australia. [Downloadable!]
    Other versions:
  9. Crosby, M. & Olekalns, N., 1997. "Inflation, Unemployment and the Nairu in Australia," Department of Economics - Working Papers Series 543, The University of Melbourne.
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  10. Guy Debelle & James Vickery, 1997. "Is the Phillips Curve a Curve? Some Evidence and Implications for Australia," RBA Research Discussion Papers rdp9706, Reserve Bank of Australia. [Downloadable!]
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  11. William T. Gavin & William Poole, 2003. "What should a central bank look like?," The Regional Economist, Federal Reserve Bank of St. Louis, issue Jul, pages 4-9. [Downloadable!]
  12. Philip Arestis & Malcolm Sawyer, 2002. "Can Monetary Policy Affect The Real Economy?," Macroeconomics 0209012, EconWPA. [Downloadable!]
    Other versions:
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