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How should central banks define price stability?

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  • Mark A. Wynne

Abstract

It is now generally accepted that the primary objective of central banks should be the maintenance of price stability. This paper considers the question of how central banks should define price stability. I address three specific questions. First, should central banks target broad or narrow measures of inflation? Second, should central banks target headline or core measure of inflation? And third, should central banks define price stability as prevailing at some positive measured rate of inflation?

Suggested Citation

  • Mark A. Wynne, 2008. "How should central banks define price stability?," Globalization Institute Working Papers 08, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:08
    Note: Published as: Wynne, Mark A. (2009), "How Should Central Banks Define Price Stability?," in Designing Central Banks, eds. David Mayes and Geoffrey Wood (London: Routledge), 107-129.
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    File URL: http://dallasfed.org/assets/documents/institute/wpapers/2008/0008.pdf
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    References listed on IDEAS

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    Cited by:

    1. Cendejas Bueno, José Luis & Castañeda, Juan Enrique & Muñoz, Félix, 2015. "Business cycles and monetary regimes in the U.S. (1960 – 2014): A plea for monetary stability," Working Papers in Economic Theory 2015/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    2. Mayes, David & Virén, Matti, 2008. "The Impact of Asset Prices and Their Information Value for Monetary Policy11David Mayes is director, Europe Institute, University of Auckland, private bag 92019, Auckland 1142, New Zealand: e-mail: d.," The Journal of Economic Asymmetries, Elsevier, vol. 5(2), pages 1-26.
    3. Afees A. Salisu & Elias A. Udeaja & Silva Opuala-Charles, 2022. "Central Bank Independence And Price Stability Under Alternative Political Regimes: A Global Evidence," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(2), pages 155-172, August.
    4. Stan du Plessis, 2014. "Targeting core inflation in emerging market economies," Working Papers 23/2014, Stellenbosch University, Department of Economics.
    5. Apel, Mikael & Armelius, Hanna & Claussen, Carl Andreas, 2017. "The level of the inflation target – a review of the issues," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 2, pages 36-56.

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    More about this item

    Keywords

    Inflation (Finance); Financial stability; Price indexes; Monetary policy;
    All these keywords.

    JEL classification:

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

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