Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under 'the opportunistic approach to disinflation' a central bank controls inflation aggressively when inflation...

This paper proposes new measures of the effectiveness of inflation targeting (IT) and evaluates its main drivers in a (large) sample of advanced economies (AEs) and emerging market and developing economies (EMDEs). Using synthetic control methods, we find that IT has heterogeneous effects on...

We construct an empirical test of whether the anticipation of adoption of inflation targeting affects the inflation rate. We observe that most of the central banks adopt the regime after first achieving significant disinflation. With pre-inflation-targeting-disinflation, initial targets are met...

In low-rate environments, policy strategies that involve holding rates "lower for longer" (L4L) may mitigate the effects of the effective lower bound (ELB). However, these strategies work in part by managing the public's expectations, which is not always realistic. Using the Fed's large-scale...

Policy mix problems may arise in a monetary union with centralized monetary policy and decentralized fiscal policy. A consequence of this may be an inappropriate stabilization of shocks. This paper addresses how policy coordination problems are affected by the objectives of the monetary...

In expectations-driven liquidity traps, a higher inflation target is associated with lower inflation and consumption. As a result, introducing the possibility of expectations-driven liquidity traps to an otherwise standard model lowers the optimal inflation target. Using a calibrated New...

This paper aims to contribute to a better understanding on how inflation targets are set. For this reason, we first gather evidence from official central bank and government publications and from a questionnaire sent to central banks on how inflation targets are set; we then estimate the...

On 11-12 May 2011, SUERF and the Belgian Financial Forum, in association with the Brussels Finance Institute and the Centre for European Policy Studies (CEPS) organized the 29th SUERF Colloquium “New Paradigms in Money and Finance?” All the papers in the present SUERF Study are based on...

In this paper I evaluate inflation targeting for ten countries. The evaluation is based on unconditional as well as conditional measures of the variance of inflation around target. With strict inflation targeting, expectations of the future deviation from target given information about the...

The inflation targeting (IT) regime is 17 years old. With practice of IT now in more than 21 countries, there is enough evidence gathered to take stock of the IT experience. In this paper, we analyze the inflation record of IT central banks. We extend the work of Albagli and Schmidt-Hebbel...