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Inflation targeting: lessons from four countries

  • Frederic S. Mishkin
  • Adam S. Posen

In recent years, a number of central banks have chosen to orient their monetary policy toward the achievement of numerical inflation targets. This study examines the experience of the first three countries to adopt an inflation-targeting strategy--New Zealand, Canada, and the United Kingdom. It also considers the German experience with a monetary targeting scheme that incorporated many elements of inflation targeting even earlier. The authors find that the countries adopting a numerical inflation target have successfully maintained low inflation rates. Other benefits of inflation targeting include increased central bank accountability, heightened public understanding of monetary policy, and an improved climate for economic growth.

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Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (1997)
Issue (Month): Aug ()
Pages: 9-110

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Handle: RePEc:fip:fednep:y:1997:i:aug:p:9-110:n:v.3no.3
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  5. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  6. Benjamin M. Friedman & Kenneth N. Kuttner, 1996. "A price target for U.S. monetary policy? Lessons from the experience with money growth targets," Working Paper Series, Macroeconomic Issues WP-96-14, Federal Reserve Bank of Chicago.
  7. Jeffrey C. Fuhrer, 1995. "The Phillips curve is alive and well," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 41-56.
  8. Michael Reddell, 1988. "Inflation and the monetary policy strategy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 51, june.
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  10. Lars E.O. Svensson, 1993. "The Simplest Test of Inflation Target Credibility," NBER Working Papers 4604, National Bureau of Economic Research, Inc.
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  16. Ralph C. Bryant, 1996. "Central Bank Independence, Fiscal Responsibility, and the Goals of Macroeconomic," Discussion Papers 126, Brookings Institution International Economics.
  17. Laurence Ball, 1993. "What determines the sacrifice ratio?," Working Papers 93-21, Federal Reserve Bank of Philadelphia.
  18. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," NBER Working Papers 5191, National Bureau of Economic Research, Inc.
  19. Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-28, November.
  20. Easton, Brian, 1994. "Economic and Other Ideas behind the New Zealand Reforms," Oxford Review of Economic Policy, Oxford University Press, vol. 10(3), pages 78-94, Autumn.
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  23. Gregory D. Hess & Charles S. Morris, 1996. "The long-run costs of moderate inflation," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 71-88.
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  25. Michael Sarel, 1996. "Nonlinear Effects of Inflation on Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 199-215, March.
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