Why Inflation Targeting?
Government of Canada - Bank of Canada; National Bureau of Economic Research (NBER)
International Monetary Fund (IMF) - Research Department
IMF Working Paper No. 09/86
This is the second chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." We begin by discussing the costs of inflation, including their role in generating boom-bust cycles. Following a general discussion of the need for a nominal anchor, we describe a specific type of monetary anchor, the inflation-targeting regime, and its two key intellectual roots-the absence of long-run trade-offs and the time-inconsistency problem. We conclude by providing a brief introduction to the way in which inflation targeting works.
Number of Pages in PDF File: 27
Keywords: Inflation targeting, Monetary policy, Inflation, Economic modelsworking papers series
Date posted: April 28, 2009
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