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A Band-Aid Solution to Inflation Targeting

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  • Robert Amano
  • Richard Black
  • Marcel Kasumovich

Abstract

This paper reviews selectively the literature on exchange rate target zones and corresponding methodologies and examines whether they can be used to analyse the inflation-control problem. Given the close correspondence between the exchange rate and inflation-targeting problems, the target-zone literature may help us better understand inflation dynamics and central-bank credibility in the presence of inflation-control targets or ranges. While we find many common elements across the exchange rate and inflation-control target-zone problems, we also find several important differences that make a direct application of the exchange rate target-zone techniques difficult.

Suggested Citation

  • Robert Amano & Richard Black & Marcel Kasumovich, 1997. "A Band-Aid Solution to Inflation Targeting," Staff Working Papers 97-11, Bank of Canada.
  • Handle: RePEc:bca:bocawp:97-11
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    References listed on IDEAS

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    Cited by:

    1. Alfred A. Haug & Pierre L. Siklos, 2002. "The Term Spread International Evidence of Non-Linear Adjustment," Working Papers 2002_08, York University, Department of Economics, revised Jul 2004.
    2. Frederic S. Mishkin & Niklas J. Westelius, 2008. "Inflation Band Targeting and Optimal Inflation Contracts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 557-582, June.
    3. Felipe Schwartzman, 2020. "Inflation Target Zones as a Commitment Mechanism," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 3, pages 115-132.
    4. Westelius Niklas J, 2009. "Inflation Range Targets with Hard Edges," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-28, April.
    5. Francisco J. Ruge-Murcia, 2000. "Uncovering financial markets' beliefs about inflation targets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 483-512.
    6. Oleg Korenok & Stanislav Radchenko, 2005. "Expectations Anchoring in Inflation Targeting Regimes," Working Papers 0503, VCU School of Business, Department of Economics.
    7. Haug Alfred A & Siklos Pierre L, 2006. "The Behavior of Short-Term Interest Rates: International Evidence of Non-Linear Adjustment," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(4), pages 1-34, December.
    8. Robert Amano & Paul Fenton & David Tessier & Simon van Norden, 1996. "The credibility of monetary policy: a survey of the literature with some simple applications to Caanda," Meeting papers 9610001, University Library of Munich, Germany.

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    More about this item

    Keywords

    Inflation targets;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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