Inflation targeting has become one of the most significant developments of recent decades in both the theory and the practice of monetary policy. A rapidly expanding literature has analysed the a priori properties of various ‘inflation targeting’ strategies, and an increasing number of central banks around the world – the Bank of Canada, the Bank of England, the Swedish Riksbank, and numerous o...

Using an optimizing model we compare alternative monetary policy rules and exchange rate regimes for a small stochastic open economy with imperfect competition and short run price rigidity. The criteria to choose among rules and regimes are obtained using a welfare criterion derived from the utility function of the representative agent. The main findings of this paper are that, depending on wha...

Should inflation targeting involve some leaning against the wind? Sweden provides a case study, since the Riksbank has been leaning against the wind quite aggressively since 2010, stating concerns about risks associated with household indebtedness. The cost is high of this policy, in the form of inflation much below the target and a higher unemployment, arguably as much 1.2 percentage points hi...

We examine global dynamics under learning in New Keynesian models with price level targeting that is subject to the zero lower bound. The role of forward guidance is analyzed under transparency about the policy rule. Properties of transparent and non-transparent regimes are compared to each other and to the corresponding cases of inflation targeting. Robustness properties for different regimes ...

This study employs the panel vector autoregressive (PVAR) model to examine spillover effect of US unconventional monetary policy on inflation and non-inflation targeting emerging markets post credit crunch during COVID-19 from 2000Q1 2020Q4. Unlike other analyses, this paper adds existing body knowledge by employing a dummy variable represent United States’ quantitative easing. Other included c...

We inspect how inflation target announcements are instrumental in building central bank credibility and shaping the public’s inflation expectations. Investigating the role of announcements in two early adopters of inflation targeting by using a time varying credibility measure, we find that both the accuracy and the frequency of inflation announcements have a positive impact on how much attenti...

The views expressed are those of the author and do not reflect those of either the Bank of England or the Monetary Policy Committee.

On 21–22 July 1997, the Bank convened a conference entitled, 'Monetary Policy and Inflation Targeting'. The following excer pt is the introductory chapter of the conference volume. Medium-term price stability is widely accepted as the appropriate ultimate goal for monetary policy. This reflects two ideas. The first is that high rates of inflation distort decision-making, ultimately leading to s...

Glenn Stevens for helpful comments. The views expressed are those of the author, and not necessarily those of the Reserve Bank of Australia.

he decision to organize a country’s monetary strategy around the direct targeting of inflation rests upon a number of economic arguments about what monetary policy can and cannot do. Over the last twenty years, a consensus has been emerging in the economics profession that activist monetary policy to stimulate output and reduce unemployment beyond their sustainable levels leads to higher inflat...