On 8 October 1992, three weeks after sterling’s departure from the Exchange Rate Mechanism of the European Monetary System, Norman Lamont, then Chancellor of the Exchequer, established a new framework for monetary policy based on a range of 1%–4% for annual RPIX inflation.(1) In 1997 this framework was further developed with the Bank of England being given operational independence and a symmetr...

Robert J. Barro’s article, “Inflation and Growth,” presents the results of regressions of per capita output growth on inflation across countries and over time. He finds that there is a statistically significant negative slope coefficient estimate in these regressions; the estimate usually lies between 0.02 and 0.04. As far as I can tell, Barro wants to interpret these results as follows. Suppos...

This paper reviews the monetary policy framework and implementation in Zambia since 1992. The paper argues that the thrust and orientation of monetary policy after 1992 has been towards market-based instruments of monetary control. In the process, it has been possible to reduce inflation from three-digit figures to an average of about 23 per cent over the past three years. However, formidable c...

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 ...

It is a pleasure to comment on the paper by César Calderón and Klaus SchmidtHebbel. Typically, when economists ask the question ‘what drives inflation?’, explanations turn to monetary factors. The problem of inflation control is naturally encapsulated in the new Keynesian models such as that described in Woodford (2003) and Galí (2008). An important contribution of César and Klaus’s paper is th...

Inflation targeting is a monetary-policy strategy that was introduced in New Zealand in 1990, has been very successful in terms of stabilizing both inflation and the real economy, and as of 2007 had been adopted by more than 20 industrialized and non-industrialized countries. It is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major ...

Abstract: Inflation targeting (IT) has recently become a popular monetary policy tool to fight inflation in advanced as well as emerging market economies. IT is assumed to curtail inflationary expectations; aiding monetary authorities implement disinflationary policies. The evidence toward IT’s role in anchoring expectations in practice can be at best described as mixed, if not confusing. In th...

Johnson’s paper addresses one of the main issues of central banking: How successful have monetary authorities been in acquiring credibility for their inflation objectives? Johnson’s approach is both simple and elegant. For countries with explicit inflation targets, he examines whether inflation expectations are consistent with those targets. Since not all central banks have explicit inflation t...

In the early postwar years, during the heyday of fiscal fine-tuning, monetary policy was not widely considered a particularly interesting or important topic. The predominant view was that the main function of monetary policy was to “stimulate” debt-financed purchases by keeping interest rates low. Inflation was first considered a useful lubricant to be traded for lower unemployment, and inflati...