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Inflation targeting and optimal control theory

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  • Veloso, Thiago
  • Meurer, Roberto
  • Da Silva, Sergio

Abstract

We make a case for the usefulness of an optimal control approach for the central banks’ choice of interest rates in inflation target regimes. We illustrate with data from selected developed and emerging countries with longest experience of inflation targeting.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3834.

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Date of creation: 04 Jul 2007
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Handle: RePEc:pra:mprapa:3834

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Keywords: inflation targeting; optimal control theory; Taylor rule; monetary policy;

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  1. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
  2. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
  3. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
  4. Chorng-Huey Wong & Eric V. Clifton & H. L. Leon, 2001. "Inflation Targeting and the Unemployment-Inflation Trade-Off," IMF Working Papers 01/166, International Monetary Fund.
  5. Barry Eichengreen, 2002. "Can Emerging Markets Float? Should They Inflation Target?," Working Papers Series 36, Central Bank of Brazil, Research Department.
  6. Adam Posen, 1995. "Central bank independence and disinflationary credibility: a missing link?," Staff Reports 1, Federal Reserve Bank of New York.
  7. Miguel A. Savastano & Paul R. Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  8. Hutchison, M M & Walsh, C E, 1998. "The Output-Inflation Tradeoff and Central Bank Reform: Evidence from New Zealand," Economic Journal, Royal Economic Society, vol. 108(448), pages 703-25, May.
  9. Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-34.
  10. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
  11. repec:nbr:nberwo:12876 is not listed on IDEAS
  12. Marcelo Kfoury Muinhos & Sérgio Afonso Lago Alves & Gil Riella, 2002. "Modelo Estrutural com Setor Externo: Endogenização do Prêmio de Risco e do Câmbio," Working Papers Series 42, Central Bank of Brazil, Research Department.
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