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Sustainability, flexibility, and inflation targeting

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  • Kurozumi, Takushi

Abstract

This paper examines sustainability of an inflation-targeting policy regime in terms of sustainable equilibrium using a canonical model in the recent literature. Overly flexible inflation targeting is not sustainable. Strict inflation targeting is sustainable only when shock persistence is high enough.

Suggested Citation

  • Kurozumi, Takushi, 2012. "Sustainability, flexibility, and inflation targeting," Economics Letters, Elsevier, vol. 114(1), pages 80-82.
  • Handle: RePEc:eee:ecolet:v:114:y:2012:i:1:p:80-82 DOI: 10.1016/j.econlet.2011.09.020
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    References listed on IDEAS

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    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
    2. Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August.
    3. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, pages 1661-1707.
    4. Bennett T. McCallum & Edward Nelson, 2004. "Timeless perspective vs. discretionary monetary policy in forward-looking models," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 43-56.
    5. V. V. Chari & Patrick J. Kehoe, 1993. "Sustainable Plans and Mutual Default," Review of Economic Studies, Oxford University Press, pages 175-195.
    6. Kurozumi, Takushi, 2008. "Optimal sustainable monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1277-1289, October.
    7. Carl E. Walsh, 2010. "Monetary Theory and Policy, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262013770, January.
    8. Ireland, Peter N., 1997. "Sustainable monetary policies," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 87-108, November.
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    Cited by:

    1. Imran Hussain Shah & Ahmad Hassan Ahmad, 2017. "How important is the financial sector to price indices in an inflation targeting regime? An empirical analysis of the UK and the US," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 1063-1082, May.
    2. Can Tansel TUGCU & Serdar OZTURK, 2015. "Bucharest University of Economic Studies, Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(605), W), pages 105-112, Winter.
    3. repec:agr:journl:v:4(605):y:2015:i:4(605):p:105-112 is not listed on IDEAS

    More about this item

    Keywords

    Inflation targeting; Flexibility; Sustainable equilibrium;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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