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Inflation Targeting as a Means of Achieving Disinflation

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  • Saborowski, Christian

Abstract

In this paper, we take an analytical approach to examine possible adverse effects of the use of inflation targeting as a disinflation regime. The idea is that a strict interpretation of an inflation target may preserve inflationary distortions after price stability is attained. We show that such a policy not only creates a slump in output but may increase macroeconomic volatility substantially in a model in which wages are subject to a Taylor staggering structure.

Suggested Citation

  • Saborowski, Christian, 2009. "Inflation Targeting as a Means of Achieving Disinflation," Economic Research Papers 271305, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:271305
    DOI: 10.22004/ag.econ.271305
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    1. Saborowski, Christian, 2010. "Inflation targeting as a means of achieving disinflation," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2510-2532, December.

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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