Since it was first introduced by New Zealand and Chile in 1990, Canada in 1991, and the United Kingdom in 1992, inflation targeting (IT) has received a lot of attention in the public and academic debate over the design of monetary policy regimes. In part, this attention reflects the growing number of countries that have adopted an IT regime over the past decade. Schaechter, Stone, and Zelmer (2...

This paper deals with a “new” type of monetary policy making: Inflation Targeting (IT). It attempts to identify reasons for which countries might be inclined to adopt this framework for monetary policy. By reviewing recent experience of inflation targeting countries, the paper outlines the major operational arguments regarding the implementation of IT. Another important issue is the applicabili...

Over the last decade, many central banks have adopted polices known as inflation targeting. To prepare intermediate level macroeconomics students to think about current policy issues, it is important to provide them with an introduction to the macroeconomic implications of inflation targeting. Unfortunately, the standard aggregate demandaggregate supply frameworks commonly used to teach interme...

Two major developments marked the monetary sector in emerging market economies (EMEs) in the 1990s. One was the steady decline in the inflation rate to low levels in the second half of the decade. The other was the growing preference for conducting monetary policy based on inflation targeting. For example, average inflation in 10 of the 14 EMEs discussed in this paper declined to a single digit...

had involuntarily exited from its fixed exchange rate regime and had experienced a sharp currency depreciation as a result. The macroeconomic background was one of high and rising inflation expectations but a contracting real economy. The initial conditions for inflation targeting were not, therefore, particularly propitious. Despite this unfavorable backdrop, the United Kingdom’s experience wi...

this research follows two aims in case of the iranian economy. first, study of the presence of inflation persistency, and second, looking for an optimal monetary policy rule. results show that inflation in the economy of iran is persistent, in which, short-term and long-term effects of monetary policy should be considered. for this purpose, a loss function for the central bank with arguments of...

ISSN 0428-1276 Low inflation over long periods is the sign of an effective central bank. The authors suggest that a large fraction of the worldwide decline in inflation since the early 1980s results from an international movement toward more independent central banks. Industrialized nations have achieved a remarkable decline in inflation: Their average annual rate tumbled from 5.6% in the 1955–...

Faced with real and nominal shocks, what should a benevolent central bank do, fix the money growth rate or target the inflation rate? In this paper, we make a first attempt at studying the optimal choice of monetary policy instruments in a micro-founded model of money. Specifically, we produce an overlapping generations economy in which limited communication and stochastic relocation creates an...

In a stylized Neo-Keynesian model with Calvo-type price and wage stickiness, this paper evaluates the usefulness of delegating price level and nominal wage targets to a discretionary central bank when the monetary policy objectives are summarized by a utility-based loss function. Despite its ability to engender policy inertia, price level targeting is often dominated by inflation targeting when...