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...

This paper assesses the prospects for the new Polish monetary policy strategy of inflation targeting. Regarding the general requirements for implementing an inflation targeting strategy it appears that Poland has made sufficient progress in reducing fiscal dominance and hardening budget constraints. The paper also finds that the exchange rate has played a dominant role as a policy instrument, w...

In a standard overlapping generations model, active monetary policy reinforces mechanisms that lead to equilibrium indeterminacy and to countercyclical behavior of young-age consumption. The policy rule which minimizes inflation volatility can be active or passive, depending on the characteristics of shocks and the risk aversion of households. Inflation forecast errors are always greater under ...

In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We develop a two-sector new-Keynesian model to evaluate different inflation targeting rules in economies with financial frictions. We conclude that, in the presence of financial frictions, a welfaremaximizing central bank should adopt flexible head...

the main objective of this paper is to investigate the effects of monetary regime (countries with inflation targeting monetary policy versus countries with exchange rate anchor) on the extent of exchange rate pass-through over the period of 1999-2010. to achieve this objective, the econometric model has been estimated by dynamic panel data approach and arrelano- bond (ab) method. the empirical ...

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 paper looks at the evolution of monetary policy in industrialized countries by evaluating two monetary policy strategies, monetary targeting and inflation targeting. The paper provides brief case studies of countries that have adopted these two strategies and draws a set of lessons. The experience with monetary targeting suggests that although it was successful in controlling inflation in S...

This paper evaluates inflation targeting in the context of recent theoretical developments concerning the issue of creditability. The first part of the paper argues that the problems of operational and political credibility inherent in a reputation based inflation targeting policy would be avoided by a rule based inflation expectation targeting policy. The second part of the paper demonstrates ...