Price-level Targeting versus Inflation Targeting in a Forward-looking Model

This paper examines a price-level target in a model with a forward-looking Calvo-Taylor Phillips curve. Contrary to conventional wisdom, it is found that price-level targeting leads to a better trade-off between inflation and output-gap variability than inflation targeting, when the central bank acts under discretion. In some cases, price-level targeting under dircretion results in the same equilibrium as inflation targeting under commitment.

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Year of publication:	2000
Authors:	Vestin, David
Publisher:	Stockholm : Sveriges Riksbank
Subject:	Monetary policy \| Price-level targeting \| Inflation targeting

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Series:	Sveriges Riksbank Working Paper Series ; 106
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	877341710 [GVK] hdl:10419/82434 [Handle] RePEc:hhs:rbnkwp:0106 [RePEc]
Classification:	E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies
Source:	EconStor

Persistent link: https://www.econbiz.de/10010321295