In recent years, a number of central banks have announced numerical inflation targets as the basis for their monetary strategies. After outlining the reasons why such strategies might be adopted in the pursuit of price stability, this study examines the adoption, operational design, and...

A simple test of inflation target credibility is constructed by subtracting the maximum and minimum inflation rates consistent with the inflation targets from the yields to maturity on nominal bonds. This results in a target-consistent range of real yields on nominal bonds. If expected real...

This paper examines the choice of a monetary-policy rule in a simple macroeconomic model. In a closed economy, the optimal policy is a output and inflation. In an open economy, the optimal rule changes in two ways. First, the policy instrument is a Conditions Index the exchange rate. Second, on...

This paper begins with a description of the inflation targeting arrangements currently in place in the four above-mentioned countries and their performance records through mid-1995 are reviewed. It is argued, however, that too little time has passed for conclusions to be drawn, so that tentative...

We study the (lack of) anchoring of inflation expectations in New Zealand using a new survey of firms. Managers of these firms display little anchoring of inflation expectations, despite twenty-five years of inflation targeting by the Reserve Bank of New Zealand, a fact which we document along a...

Japanization is defined as a combinations of the following economic conditions: (1) the actual growth rate is lower than the potential growth rate for an extended period; (2) the natural real interest rate is below zero and also below the actual real interest rate; (3) the nominal (policy)...

In the spring of 2013 the Bank of Japan introduced a state-of-the-art monetary policy which included among other things inflation targeting and aggressive use of forward guidance. In contrast to the predictions of conventional macroeconomic theory, these policies have had only very limited...

Should policymakers offer forward guidance in terms of a path for an instrument such as interest rates or a target for an outcome such as unemployment? We study how the optimal approach depends on a departure from rational expectations. People have a limited understanding of the behavior of...

This paper reports empirical results indicating that there is no compelling evidence in favor of singling outany one variable as "the intermediate target" of monetary policy. Of the variables considered here - including money (M1), credit, a long-term interest rate, and whichever of either...

The paper aims at explaining why the Bank of Japan has not adopted inflation targeting, despite calls for such a policy. Disclosed minutes of the Monetary Policy Meetings of the Bank of Japan, after March 1998, as well as Speeches by its members give clues to changing reasons against inflation...