Inflation Targeting, Price-Path Targeting and Output Variability

35 Pages Posted: 16 May 2003

See all articles by Stephen G. Cecchetti

Stephen G. Cecchetti

Brandeis International Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Junhan Kim

The Bank of Korea

Date Written: May 2003

Abstract

The dramatic improvement in macroeconomic outcomes during the 1990s - stable, low inflation and high, stable growth - can be at least partly ascribed to improved monetary policy. Central banks became more independent and many of them adopted inflation targeting. This paper examines the potential for further improvements by refining the concept of inflation targeting. We construct a general model that encompasses a broad array of possible target regimes, and apply it to the data. Our results suggest that the vast majority of countries could benefit from moving to pricepath targeting, where the central bank makes up for periods of above (below) target inflation with later periods of below (above) target inflation.

Suggested Citation

Cecchetti, Stephen G. and Kim, Junhan, Inflation Targeting, Price-Path Targeting and Output Variability (May 2003). NBER Working Paper No. w9672. Available at SSRN: https://ssrn.com/abstract=406044

Stephen G. Cecchetti (Contact Author)

Brandeis International Business School ( email )

415 South Street
Waltham, MA 02453
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
212-720-8629 (Phone)
212-720-2630 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Junhan Kim

The Bank of Korea ( email )

39, Namdaemun-ro
Jung-gu
Seoul, 100-794
Korea, Republic of (South Korea)
82-2-759-4201 (Phone)
82-2-750-6580 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
37
Abstract Views
922
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information