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Does Talk Matter After All? Inflation Targeting and Central Bank Behavior

  • Kenneth N. Kuttner

    (Peterson Institute for International Economics)

  • Adam S. Posen

    ()

    (Peterson Institute for International Economics)

Since 1990, a number of countries have adopted inflation targeting as their declared monetary strategy. Interpretations of the significance of this movement, however, have differed widely. To some, inflation targeting mandates the single-minded, rule-like pursuit of price stability without regard for other policy objectives; to others, inflation targeting represents nothing more than the latest version of cheap talk by central banks unable to sustain monetary commitments. Advocates of inflation targeting, including the adopting central banks themselves, have expressed the view that the transparency and communication of the inflation targeting framework grant the central bank greater short-run flexibility in pursuit of its long-run inflation goal.

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Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP99-10.

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Date of creation: 1999
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Handle: RePEc:iie:wpaper:wp99-10
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