IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Inflation Targets as a Stabilisation Device

  • Mahadeva, Lavan

    (Bank of England)

  • Gabriel Sterne

Over 80% of countries using explicit inflation targets in 2000 were doing so either as part of a disinflation strategy, or when inflation was neither low nor stable. Our illustrative theoretical model suggests annual revisions to short-run targets are endogenous to inflation outcomes during disinflation as long as the policymaker cares about misses from both the short-run target and a long-run target. Furthermore, target revisions will are larger when the target is undershot compared to when the target is overshot. We confirm the result using cross-country panel estimates from a unique data-set of inflation target misses in 60 countries in the 1990s. During disinflation it is therefore relatively difficult to separate decisions about target-setting from implementation. Short-term targets on a disinflation path may be more akin to conditional forecasts than policy rules, but their publication may nevertheless increase transparency and hence help policymakers to achieve lower inflation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://repec.org/res2002/Mahadeva
File Function: full text
Download Restriction: no

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 134.

as
in new window

Length:
Date of creation: 29 Aug 2002
Date of revision:
Handle: RePEc:ecj:ac2002:134
Contact details of provider: Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Web page: http://www.res.org.uk/society/annualconf.asp
Email:


More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ecj:ac2002:134. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.