Inflation Targeting: A New Framework for Monetary Policy?

31 Pages Posted: 12 Sep 2000 Last revised: 5 Oct 2010

See all articles by Ben S. Bernanke

Ben S. Bernanke

Board of Governors of the Federal Reserve System

Frederic S. Mishkin

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: January 1997

Abstract

In recent years a number of industrialized countries have adopted a strategy for monetary policy known as `inflation targeting.' We describe how this approach has been implemented in practice and argue that it is best understood as a broad framework for policy, which allows the central bank `constrained discretion,' rather than as an ironclad policy rule in the Friedman sense. We discuss the potential of the inflation-targeting approach for making monetary policy more coherent and transparent, and for increasing monetary policy discipline. Our final section addresses some additional practical issues raised by this approach.

Suggested Citation

Bernanke, Ben S. and Mishkin, Frederic S., Inflation Targeting: A New Framework for Monetary Policy? (January 1997). NBER Working Paper No. w5893, Available at SSRN: https://ssrn.com/abstract=225675

Ben S. Bernanke (Contact Author)

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Frederic S. Mishkin

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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