Showing 1 - 10 of 10
We examine to what extent variants of inflation-forecast targeting can avoid stabilization bias, incorporate history-dependence, and achieve determinancy of equilibrium, so as to reproduce a socially optimal equilibrium. We also evaluate these variants in terms of the transparency of the...
Persistent link: https://www.econbiz.de/10012468951
bound, liquidity traps and risks of deflation are serious concerns for a monetary policy aimed at low inflation. Forecast … targeting with a symmetric positive inflation target keeps the risk of the zero bound, liquidity traps and deflation small …
Persistent link: https://www.econbiz.de/10012469217
This paper proves a certainty equivalence result for optimal policy under commitment with symmetric partial information about the state of the economy in a model with forward-looking variables. This result is used in our previous paper, Indicator Variables for Optimal Policy,' which synthesizes...
Persistent link: https://www.econbiz.de/10012469273
It is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule, either a general targeting rule (explicit objectives for monetary policy) or a specific targeting rule (a criterion for (the forecasts of) the target variables to be...
Persistent link: https://www.econbiz.de/10012469282
Policy rules that are consistent with inflation targeting are examined in a small macroeconomic model of the US economy. We compare the properties and outcomes of explicit instrument rules' as well as targeting rules.' The latter, which imply implicit instrument rules, may be closer to actual...
Persistent link: https://www.econbiz.de/10012472292
We define and study transparency, credibility, and reputation in a model where the central bank's characteristics are unobservable to the private sector and are inferred from the policy outcome. A low-credibility bank optimally conducts a more inflationary policy than a high-credibility bank, in...
Persistent link: https://www.econbiz.de/10012472353
Previous analysis of the implementation of inflation targeting is extended to monetary policy responses to different shocks, consequences of model uncertainty, effects of interest rate smoothing and stabilization, a comparison with nominal GDP targeting, and implications of forward-looking...
Persistent link: https://www.econbiz.de/10012472859
This paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes. Traditionally, interest rates and forward exchange rates have been used to extract expected means of future interest rates, exchange rates...
Persistent link: https://www.econbiz.de/10012472951
Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an explicit intermediate target. Inflation forecast targeting simplifies both implementation and monitoring of monetary policy. The weight on output stabilization determines how...
Persistent link: https://www.econbiz.de/10012473036
Price level targeting (without base drift) and inflation targeting (with base drift) are compared under commitment and discretion, with persistence in unemployment. Price level targeting is often said to imply more short-run inflation variability and thereby more employment variability than...
Persistent link: https://www.econbiz.de/10012473119