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Inflation Targets Reconsidered: Comments on Paul Krugman

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  • Guido Tabellini

Abstract

Paul Krugman has written a very timely paper. It discusses an old issue, that has become very relevant again. My comments address two questions. First, should inflation targeting be reconsidered? Here my answer is a clear and resounding yes. Inflation targeting performed very well in the fight against inflation and in stabilizing inflation expectations. But now, even leaving issues of financial stability aside, monetary policy is faced with different challenges. Second, which features of the inflation targeting framework should be changed? Here I argue that other aspects of the framework are more important than the numerical value of the target. In addressing these questions, I review Paul Krugman’s arguments, agreeing with many but not all of them.

Suggested Citation

  • Guido Tabellini, 2014. "Inflation Targets Reconsidered: Comments on Paul Krugman," Working Papers 525, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:525
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    References listed on IDEAS

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    1. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
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    7. Svensson, Lars-E-O, 2001. "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(S1), pages 277-312, February.
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