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A Band-Aid Solution to Inflation Targeting

Author

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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. Oleg Korenok & Stanislav Radchenko, 2005. "Expectations Anchoring in Inflation Targeting Regimes," Working Papers 0503, VCU School of Business, Department of Economics.
    3. 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.
    4. Felipe Schwartzman, 2020. "Inflation Target Zones as a Commitment Mechanism," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 3, pages 115-132.
    5. 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.
    6. 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.
    7. 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.
    8. 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.

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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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