Given the increasing importance of achieving low and stable inflation rate during the last decades, adopting the most suitable practices to implement monetary policies has always been of concern by monetary authorities of different countries. Inflation targeting (IT) regime is the most recent strategy to guide monetary policies that have been introduced following the occurrence of exchange rate...

The 1990s have seen a growing number of countries adopt a new approach to the conduct of monetary policy: inflation targeting. Canada was one of the first, formally embarking on this approach in February 1991. It has been very successful in the countries that have adopted it, producing low and stable inflation without lowering output growth (and arguably, helping to increase economic growth). D...

Over the last five years, a number of authors have suggested that targeting inflation rates of, say, less than 3 per cent could lead to significant economic difficulties. In the period prior to the renewal of the inflation target, Bank staff have reviewed the literature and have undertaken new research into this issue. The Bank also held a seminar at which papers by both Bank staff and outside ...

This paper critically examines a new literature that supports price-level targeting (PT) over inflation targeting (IT).1 This literature shows that it is better for the central bank (the Bank) to gradually wrestle the price level, rather than the inflation rate, back to the target path. PT provides a firm nominal anchor for expectations, and thereby conditions private sector expectations in a w...

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...

Because inflation targeting is a relatively recent phenomena, in the past we have had insufficient data to conduct time-series econometric work to evaluate this important new monetary policy strategy. However, now that inflation targeting has been around for close to ten years, we are able to do some preliminary econometric work on this topic. This is exactly what Neumann and von Hagen do in th...

Starting with the Reserve Bank of New Zealand, over the past twenty years a large number of central banks have adopted inflation targeting as their framework for monetary policy. As the second decade of inflation targeting comes to a close, a retrospective assessing how well it has worked, what lessons have been learned and what challenges may lie ahead is most appropriate. During much of the p...