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How should central banks define price stability?

  • Wynne, Mark A.

    ()

    (Federal Reserve Bank of Dallas)

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?

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File URL: http://dallasfed.org/assets/documents/institute/wpapers/2008/0008.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 08.

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Length: 37 pages
Date of creation: 2008
Date of revision:
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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