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Establishing a Reputation for Dependability by Means of Inflation Targets

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  • Cukierman, A.

    (Tilburg University, School of Economics and Management)

Abstract

This paper develops a simple intertemporal model of inflation targets within a framework in which the public is uncertain about the dependability of policymakers, and in which policymakers do not perfectly control inflation. The framework is used to evaluate the effects of various parameters like the rate of time preference, initial reputation, and transparency (or precision of inflation control) on planned inflation, announced targets and the evolution of reputation and of inflationary expectations. The paper also shows that, when allowed to choose the precision of inflation control, more dependable policymakers will often choose relatively more precise control procedures. Implications for the type of inflation stabilization (cold turkey or gradual) chosen by dependable policymakers are also derived. Copyright Springer-Verlag Berlin Heidelberg 2000
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Cukierman, A., 1999. "Establishing a Reputation for Dependability by Means of Inflation Targets," Other publications TiSEM ef0f20de-0e72-4cdf-ba89-7, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:ef0f20de-0e72-4cdf-ba89-7287c7294abb
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    Cited by:

    1. Baaziz, Yosra & Labidi, Moez & Lahiani, Amine, 2013. "Does the South African Reserve Bank follow a nonlinear interest rate reaction function?," Economic Modelling, Elsevier, vol. 35(C), pages 272-282.
    2. Cukierman, Alex, 2008. "Central bank independence and monetary policymaking institutions -- Past, present and future," European Journal of Political Economy, Elsevier, vol. 24(4), pages 722-736, December.
    3. Bendor, Jonathan & Glazer, Ami & Hammond, Thomas H., 2000. "Theories of Delegation in Political Science," Research Papers 1655, Stanford University, Graduate School of Business.
    4. Cukierman, Alex, 2015. "The choice of flexibility in targeting inflation during normal times and during disinflations," Research in Economics, Elsevier, vol. 69(4), pages 494-502.
    5. Alex Cukierman, 2006. "Should the Bank of Israel have a growth target? What are the issues?," Israel Economic Review, Bank of Israel, vol. 4(2), pages 1-18.
    6. Laubach, Thomas, 2003. "Signalling commitment with monetary and inflation targets," European Economic Review, Elsevier, vol. 47(6), pages 985-1009, December.
    7. Komlan, Fiodendji, 2013. "The asymmetric reaction of monetary policy to inflation and the output gap: Evidence from Canada," Economic Modelling, Elsevier, vol. 30(C), pages 911-923.

    More about this item

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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