Multiple Objectives in Monetary Policy: A De Facto Analysis for ‘Advanced’ Countries

Abstract

A statistical methodology is developed to identify when policymakers in ‘advanced’ economies have successfully pursued different single objectives or multiple objectives. Multiple objectives pure and simple are distinguished from multiple objectives subject to a price stability constraint. The overall and individual country results seem plausible. Unconditional and conditional analyses reveal that constrained multiple objectives are associated with roughly as good economic performance (inflation, economic growth) as the single objective of inflation. Finally the paper shows how the remit of an inflation‐targeting central bank could be adjusted to allow it to pursue other objectives in extremis without losing the credibility effects associated with inflation targeting.