In theory, monetary policies that target the price level, as opposed to the inflation rate, should be highly effective at stabilizing the economy and avoiding deflation in the presence of the zero lower bound on nominal interest rates. With such a policy, if the short-term interest rate is constrained at zero and the inflation rate declines below its trend, the public expects that policy will e...

One of the more interesting developments in central banking in the past dozen years or so has been the increasingly widespread adoption of the monetary policy framework known as inflation targeting. The approach evolved gradually from earlier monetary policy strategies that followed the demise of the Bretton Woods fixed-exchange-rate system--most directly, I believe, from the practices of Germa...

In the 1990s, several countries shifted to a new monetary policy regime: an announced quantitative inflation target. The reason for this shift was the unsatisfactory performance under previous regimes. New Zealand, Canada, Australia, and Spain all introduced inflation targets under persistently high inflation; the United Kingdom, Sweden, and Finland did so after having abandoned fixed exchange ...

the purpose of the paper is to survey and discuss inflation targeting in framework of monetary policy rules. this study design an optimal economy model for iran which compare different cases of domestic and cpi inflation targeting, strict and flexible inflation targeting.in relation to this, the optimal monetary policy rule was designed using three constraints neo-keynesian phillips curve, aggr...

We study the implications of trend inflation for an economy’s long-run growth rate. To do so, we extend a New Keynesian model to allow for endogenous growth. The defining characteristic of the New Keynesian framework is that inflation and nominal price stickiness together induce relative price dispersion and thus reduce monopoly profits. When the framework is embedded in an endogenous growth mo...