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Monetary Policy Under Inflation Targeting: An Introduction

  • Frederic S. Mishkin
  • Klaus Schmidt-Hebbel D.

This brief review takes stock of the recent literature on monetary policy under inflation targeting and introduces new analytical and empirical research in this field. Six key areas of previous research are reviewed: the practice and optimality of inflation targeting regime features; optimal monetary policy; uncertainty, learning, and monetary policy; transparency, communication, and accountability; asset prices and monetary policy; and economic performance under inflation targeting and in comparison to non-targeting regimes. The review suggests a significant number of open issues that are addressed in 13 new contributions presented at the 2005 Annual Conference of the Central Bank of Chile, which are summarized here.

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Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 9 (2006)
Issue (Month): 3 (December)
Pages: 5-17

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Handle: RePEc:chb:bcchec:v:9:y:2006:i:3:p:5-17
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  1. Batini, Nicoletta & Nelson, Edward, 2001. "Optimal horizons for inflation targeting," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 891-910, June.
  2. Svensson, Lars E O, 1996. "Price-level Targeting versus Inflation Targeting: A Free Lunch?," CEPR Discussion Papers 1510, C.E.P.R. Discussion Papers.
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  7. Norman Loayza & Raimundo Soto, 2002. "Inflation Targeting: An Overview," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 1, pages 001-022 Central Bank of Chile.
  8. Chadha, Jagjit S & Nolan, Charles, 2002. "Inflation and Price Level Targeting in a New Keynesian Model," Manchester School, University of Manchester, vol. 70(4), pages 570-95, Special I.
  9. Frederic Mishkin & Klaus Schmidt-Hebbel, 2006. "Does Inflation Targeting Make a Difference?," Working Papers Central Bank of Chile 404, Central Bank of Chile.
  10. David Johnson, 2003. "The Effect of Inflation Targets on the Level of Expected Inflation in Five Countries," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1076-1081, November.
  11. Athanasios Orphanides & John C. Williams, 2002. "Robust monetary policy rules with unknown natural rates," Working Paper Series 2003-01, Federal Reserve Bank of San Francisco.
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  17. Stephen G. Cecchetti & Hans Genberg & Sushil Wadhwani, 2002. "Asset Prices in a Flexible Inflation Targeting Framework," NBER Working Papers 8970, National Bureau of Economic Research, Inc.
  18. Frederic S. Mishkin, 2006. "Monetary Policy Strategy: How Did We Get Here?," NBER Working Papers 12515, National Bureau of Economic Research, Inc.
  19. Lars E.O. Svensson, 2003. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 145-166, Fall.
  20. Michael Woodford, 2005. "Central Bank Communication and Policy Effectiveness," NBER Working Papers 11898, National Bureau of Economic Research, Inc.
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  24. Frederic Mishkin & Klaus Schmidt-Hebbel, 2002. "A Decade of Inflation Targeting in the World: What Do We Know and What Do We Need to Know?," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 4, pages 171-220 Central Bank of Chile.
  25. Stephen G. Cecchetti & Anil K Kashyap, 1995. "International Cycles," NBER Working Papers 5310, National Bureau of Economic Research, Inc.
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  29. Michael Woodford, 2004. "Inflation targeting and optimal monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 15-42.
  30. Johnson, David R., 2002. "The effect of inflation targeting on the behavior of expected inflation: evidence from an 11 country panel," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1521-1538, November.
  31. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
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  35. 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.
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