A Note on Inflation Targeting
<title>Abstract</title> The authors present a pedagogical graphical exposition to illustrate the stabilizing effect of price target zones. Based on a textbook AD-AS apparatus, they find that authorities' commitment to defend a price target zone will affect the public's inflation expectations and, in turn, reduce actual inflation. They also find that, when the economy experiences supply shocks, the announcement that the monetary authorities intend to defend a price target zone will reduce the variability of domestic prices but raise the variability of domestic output relative to a free-price regime. However, when the economy experiences demand shocks, a price target zone tends to lower the variability of both domestic prices and out-put relative to a free-price regime.
Year of publication: |
2001
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Authors: | Lai, Ching-Chong ; Chang, Juin-Jen |
Published in: |
The Journal of Economic Education. - Taylor & Francis Journals, ISSN 0022-0485. - Vol. 32.2001, 4, p. 369-380
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Publisher: |
Taylor & Francis Journals |
Saved in:
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