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Strong Goal Independence and Inflation Targets

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  • Baltensperger, Ernst
  • Fischer, Andreas
  • Jordan, Thomas

Abstract

Inflation targeting has become the monetary policy framework of the nineties. At the other extreme, several central banks have recently adopted key elements of the inflation targeter's toolkit, but at the same time they have made formal declarations that they are not inflation targeters. Such a position may appear surprising. It indirectly suggests that a reneging strategy is beneficial for some. The paper considers reasons why it may be advantageous for some central banks to distinguish themselves from the inflation targeting strategy. Most importantly, we argue that explicit inflation targets can potentially undermine the goal independence of a central bank.

Suggested Citation

  • Baltensperger, Ernst & Fischer, Andreas & Jordan, Thomas, 2006. "Strong Goal Independence and Inflation Targets," CEPR Discussion Papers 5915, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5915
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    Cited by:

    1. Ernst Baltensperger & Philipp Hildebrand & Thomas Jordan, 2007. "The Swiss National Bank's monetary policy concept - an example of a 'principles-based' policy framework," Economic Studies 2007-03, Swiss National Bank.
    2. Alessi, Lucia & Detken, Carsten, 2011. "Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity," European Journal of Political Economy, Elsevier, vol. 27(3), pages 520-533, September.
    3. Roman Horváth & Jakub Matějů, 2011. "How Are Inflation Targets Set?," International Finance, Wiley Blackwell, vol. 14(2), pages 265-300, June.
    4. Yannick LUCOTTE, 2010. "The Choice of Adopting Inflation Targeting in Emerging Economies: Do Domestic Institutions Matter?," LEO Working Papers / DR LEO 1561, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    5. Z. Yejim Giirbiiz & Thomas Jobert & Ruhi Tuncer, 2008. "The Turkish Experience in Inflation Targeting: Uncertainties and the Efficiency of Monetary Policy," Economie Internationale, CEPII research center, issue 116, pages 127-146.
    6. Thomas J. Jordan & Michel Peytrignet & Enzo Rossi, 2010. "Ten Years' Experience with the Swiss National Bank's Monetary Policy Strategy," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(I), pages 9-90, March.
    7. Nicoletta Batini & Douglas Laxton, 2007. "Under What Conditions Can Inflation Targeting Be Adopted? The Experience of Emerging Markets," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 12, pages 467-506, Central Bank of Chile.
    8. Lucotte, Yannick, 2010. "The choice of adopting inflation targeting in emerging economies: Do domestic institutions matter?," MPRA Paper 27118, University Library of Munich, Germany.
    9. Petra Gerlach-Kristen, 2007. "Three aspects of the Swiss term structure: an empirical survey," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 21(2), pages 221-240, June.

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    More about this item

    Keywords

    Inflation targeting; Weak; Medium and strong goal independence;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • 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

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