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A Proposal to End Inflation

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  • Dowd, Kevin

Abstract

This paper suggests how the price level could be stabilized by the Bank of England adopting a rule to peg the price of a new financial instrument. This new instrument would be similar but not identical to a price-index futures contract. The paper explains how the scheme would work, assesses potential objections, and discusses how the Bank of England could enhance the credibility of its commitment to the rule. It also compares the scheme with the alternatives of targeting the monetary growth rate or targeting the price level. Copyright 1994 by Royal Economic Society.

Suggested Citation

  • Dowd, Kevin, 1994. "A Proposal to End Inflation," Economic Journal, Royal Economic Society, vol. 104(425), pages 828-840, July.
  • Handle: RePEc:ecj:econjl:v:104:y:1994:i:425:p:828-40
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    Cited by:

    1. repec:dau:papers:123456789/11496 is not listed on IDEAS
    2. Lioui, Abraham & Poncet, Patrice, 2003. "Dynamic asset pricing with non-redundant forwards," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1163-1180, May.
    3. repec:eee:jmacro:v:54:y:2017:i:pa:p:90-99 is not listed on IDEAS
    4. Alexander William Salter, 2016. "Robust Political Economy and the Lender of Last Resort," Journal of Financial Services Research, Springer;Western Finance Association, vol. 50(1), pages 1-27, August.
    5. Sumner, Scott, 2015. "Nominal GDP futures targeting," Journal of Financial Stability, Elsevier, vol. 17(C), pages 65-75.
    6. Jackson, Aaron L., 2010. "Policy futures markets with multiple goals," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 45-54, March.
    7. Suh, Sangwon & Zapatero, Fernando, 2008. "A class of quadratic options for exchange rate stabilization," Journal of Economic Dynamics and Control, Elsevier, vol. 32(11), pages 3478-3501, November.
    8. Dai, Meixing, 1998. "Les effets stabilisants de la zone-cible du taux d’inflation
      [The stabilising effects of inflation-targeting zone]
      ," MPRA Paper 13856, University Library of Munich, Germany, revised Nov 2001.
    9. Scott Sumner, 1992. "Index Future Convertibility: Reply to Woolsey," Cato Journal, Cato Journal, Cato Institute, vol. 12(2), pages 487-492, Fall.
    10. Alexander Salter, 2014. "Is there a self-enforcing monetary constitution?," Constitutional Political Economy, Springer, vol. 25(3), pages 280-300, September.

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