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Inflation Target (inflation + target)
Selected AbstractsDoes Institutional Change Really Matter?THE MANCHESTER SCHOOL, Issue 4 2002Central Bank Reform, Inflation Targets, Interest Rate Policy in the OECD Countries We estimate forward,looking interest rate reaction functions for the G3 and some inflation targeters. Shifts in the conduct of monetary policy are detected for the USA and Japan. In contrast with the existing literature, we show that these countries only shifted to policies consistent with an implicit inflation,targeting regime in the 1990s. Inflation targets and central bank reforms in Sweden, the UK, Canada and New Zealand only led in some cases to changes in policy responses, and changes in policy pre,date the introduction of targets. We challenge the one,model,fits,all approach towards monetary policy that permeates much of the current literature. [source] Open-Economy Inflation-Forecast TargetingGERMAN ECONOMIC REVIEW, Issue 1 2006Kai Leitemo Inflation targeting; forecast targeting; monetary policy; small open economy Abstract. We study simple inflation-forecast targeting in an open-economy setting. Simple inflation-forecast targeting implies setting an interest rate which, if kept unchanged throughout the forecast-targeting horizon, produces a conditional inflation forecast equal to the inflation target at the end of the horizon. We find that the optimal forecast-targeting horizon is relatively short (one year). A longer horizon does not consistently contribute to improved output stability, indeed it increases exchange rate variability and traded sector variability. The targeting procedure is substantially inferior to the optimal pre-commitment policy. Moreover, the targeting procedure does not necessarily determine the rational-expectations equilibrium and is subject to time inconsistency. [source] Some Thoughts on Monetary Targeting vs.GERMAN ECONOMIC REVIEW, Issue 3 2001Inflation Targeting We offer some empirical evidence on the likely scale of control and indicator problems surrounding alternative monetary targets and a direct inflation target. The links between monetary policy actions and inflation are estimated in dynamic linear models using the Kalman filter. We compare alternative intermediate-target and final-target monetary strategies using German data from the end of the Bretton Woods system until 1997. The estimation results show that broad money dominates narrow money as an intermediate target, while control problems involved in targeting broad money are larger than for direct inflation targets. [source] The empirics of monetary policy rules in open economiesINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2001Richard H. Clarida This paper uses the empirical framework for formulating and estimating forward looking monetary policy rules developed in Clarida, Gali and Gertler (1998, 1999, 2000, 2001) and Clarida (2000) to assess what we know, don't know, and can't tell about monetary policy making in an open economy with an (implicit) inflation target. Among the issues discussed are: the relationship between structural VAR models of monetary policy and exchange rates and estimates of forward-looking Taylor rules; the relationship between inflation targeting and leaning against the (exchange rate) wind; why central bankers are averse to even wide-band target zones; quantifying stresses and costs of a one-size-fits-all monetary policy for the members of a monetary union or currency bloc. Copyright © 2001 John Wiley & Sons, Ltd. [source] Monetary Policy and the Lost Decade: Lessons from JapanJOURNAL OF MONEY, CREDIT AND BANKING, Issue 5 2010DANIEL LEIGH liquidity trap; deflation; monetary policy; Bayesian econometrics I investigate how monetary policy can avoid a deflationary slump when policy rates are near zero by studying interest rate policy during Japan's "Lost Decade." Estimation results suggest that the Bank of Japan's interest rate policy fits a conventional reaction function with an inflation target near 1%. The disapointing economic performance thus seems primarily due to adverse economic shocks rather than extraordinary policy errors. Also, counterfactual policy simulations suggest that simply raising the inflation target would not have substantially improved performance. However, price-level targeting or combining a higher inflation target with an aggressive output response would have achieved superior stabilization results. [source] New Keynesian Macroeconomics and the Term StructureJOURNAL OF MONEY, CREDIT AND BANKING, Issue 1 2010GEERT BEKAERT monetary policy; inflation target; term structure of interest rates; Phillips curve This article complements the structural New Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro model with unobservable processes for the inflation target and the natural rate of output that are filtered from macro and term structure data. We find that term structure information helps generate large and significant parameters governing the monetary policy transmission mechanism. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target shock dominates the variation in the "level factor" whereas monetary policy shocks dominate the variation in the "slope and curvature factors." [source] OPTIMAL CONTRACTS FOR CENTRAL BANKERS AND PUBLIC DEBT POLICY*THE JAPANESE ECONOMIC REVIEW, Issue 4 2004HIROSHI FUJIKI We consider how the second-best allocation corresponding to an optimal rule under the policy commitment of a central bank and a fiscal authority with a consolidated government budget constraint can be achieved, even though these authorities are unable to commit themselves to their optimal policies and ignore the strategic interaction between their policies. Our results show that the best practical institutional arrangement is to have an instrument-independent central bank that controls the money supply to determine the rate of inflation and commits itself to an inflation target that depends on fiscal variables. [source] Some Thoughts on Monetary Targeting vs.GERMAN ECONOMIC REVIEW, Issue 3 2001Inflation Targeting We offer some empirical evidence on the likely scale of control and indicator problems surrounding alternative monetary targets and a direct inflation target. The links between monetary policy actions and inflation are estimated in dynamic linear models using the Kalman filter. We compare alternative intermediate-target and final-target monetary strategies using German data from the end of the Bretton Woods system until 1997. The estimation results show that broad money dominates narrow money as an intermediate target, while control problems involved in targeting broad money are larger than for direct inflation targets. [source] Political Macroeconomics: A Survey of Recent DevelopmentsJOURNAL OF ECONOMIC SURVEYS, Issue 5 2000Manfred Gärtner The paper surveys political macroeconomics, covering its development from Rogoff's conservative central banker to the most recent discussions of monetary policy and institutional design. Topics include the inflation-stabilization trade-off, central bank independence with escape clauses and overruling with costs, inflation targets, performance contracts for monetary authorities, and the consequences of output persistence for these issues. Further topics are the political business cycle when output is persistent, the political macroeconomics of fiscal policy, the government spending bias, and the game-theoretic interaction between fiscal and monetary policy. All work is discussed within a coherent analytical framework. [source] Does Inflation Targeting Affect the Trade,off Between Output Gap and Inflation Variability?THE MANCHESTER SCHOOL, Issue 4 2002Philip Arestis We utilize a stochastic volatility model to analyse the possible effects of inflation targeting on the trade,off between output gap variability and inflation variability. We find that the adoption of inflation targets (in New Zealand, Australia, Canada, the UK, Sweden and Finland) might result in a more favourable monetary policy trade,off (except in Australia and Finland). This conclusion is reached by comparing, first, the economic performance of targeting countries in the 1980s and the 1990s; and second, the economic performance in the 1990s of targeting and non,targeting countries (the USA, Japan, Switzerland, Germany, France and the Netherlands). We focus on two possible explanations for the performance of the inflation,targeting regime: the relatively high degree of monetary policy transparency, and the presence of a flexible institutional framework. [source] | ||||||||||