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Inflation Targeting - The Holy Grail of Monetary Policy?

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  • Hans Genberg

    (Graduate Institute of International Studies
    Hong Kong Institute of Monetary Research)

Abstract

This paper argues that the success of inflation targeting is principally the result of having a clear unambiguous goal, price stability, for monetary policy that is determined not only by the central bank but by the political authorities more generally. With such a goal in place, and with support from other macroeconomic policies, the actual operating procedure a central bank should follow depends critically on the transmission mechanism of monetary policy and on the sources of shocks in the economy. It follows that implementation of a strategy of targeting inflation could look very different from one country to another. What would be an appropriate policy rule in an industrialized country would not necessarily be suitable in an emerging market even if the ultimate goal of the central bank were the same.

Suggested Citation

  • Hans Genberg, 2002. "Inflation Targeting - The Holy Grail of Monetary Policy?," Working Papers 022002, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:022002
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    References listed on IDEAS

    as
    1. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
    2. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.
    3. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
    4. Professor Lars E O Svensson, 2001. "Independent review of the operation of monetary policy in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, March.
    5. Svensson, Lars E. O., 2000. "Open-economy inflation targeting," Journal of International Economics, Elsevier, vol. 50(1), pages 155-183, February.
    6. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging-Market Countries," American Economic Review, American Economic Association, vol. 90(2), pages 105-109, May.
    7. William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(2), pages 197-216.
    8. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Aug), pages 9-110.
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    Cited by:

    1. Robert Neil McCauley, 2006. "Understanding monetary policy in Malaysia and Thailand: objectives, instruments and independence," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 172-198, Bank for International Settlements.
    2. George B. Tawadros, 2009. "Testing the impact of inflation targeting on inflation," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 36(4), pages 326-342, September.
    3. Wai-Ching Poon & Gee-Kok Tong, 2009. "The feasibility of inflation targeting in Malaysia," Economics Bulletin, AccessEcon, vol. 29(2), pages 1035-1045.
    4. Kosta Josifidis & Emilija Beker Pucar & Slađana Srdić & Gabriela Ivan, 2014. "Inflation Targeting in Advanced vs. Emerging Economies before and after the Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(1), pages 79-106, Februar.
    5. Zafar Hayat & Saher Masood, 2022. "Inflation Targeting Skepticism: Myth or Reality? A Way Forward for Pakistan (Article)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 61(1), pages 1-27.

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