Cournède, Boris; Moccero, Diego - Economics Department, Organisation de Coopération et … - 2009
households, price-level targeting can act as a powerful built-in stabiliser through automatic shifts in inflation expectations … lower bound of nominal interest rates and falling into a liquidity trap. Furthermore, credible price-level targeting can … embedded in actual long-term real interest rates. However, price-level targeting can imply welfare-reducing policy …