A Band-Aid Solution to Inflation Targeting

Bank of Canada Working Paper 97-11

32 Pages Posted: 19 Dec 1997

See all articles by Robert A. Amano

Robert A. Amano

Bank of Canada & CREFE

Richard Black

affiliation not provided to SSRN

Marcel Kasumovich

Government of Canada - Financial Markets Department

Date Written: May 1997

Abstract

This paper reviews selectively the literature on exchange rate target zones and corresponding methodologies and examines whether they can be used to analyse the inflation-control problem. Given the close correspondence between the exchange rate and inflation-targeting problems, the target-zone literature may help us better understand inflation dynamics and central-bank credibility in the presence of inflation-control targets or ranges. While we find many common elements across the exchange rate and inflation-control target-zone problems, we also find several important differences that make a direct application of the exchange rate target-zone techniques difficult.

(French version) Les auteurs examinent quelques modeles tires des etudes portant sur les zones cibles de taux de change, dans l?intention de determiner si ces modeles peuvent servir a l?analyse de strategies axees sur la maitrise de l?inflation. Compte tenu de la grande similitude que presentent la poursuite d?objectifs en matiere de taux de change et celle d?objectifs en matiere d?inflation, ces etudes pourraient nous aider a mieux comprendre la dynamique de l?inflation ainsi que les facteurs qui concourent a la credibilite de la banque centrale lorsque cette derniere vise un taux (ou une fourchette de taux) d?inflation donne. Les deux types de strategies ont de nombreux points en commun, mais les differences importantes que les auteurs relevent entre elles rendent difficile l?application directe des modeles de zone cible a l?etude des cibles en matiere d?inflation.

JEL Classification: E52, E58

Suggested Citation

Amano, Robert A. and Black, Richard and Kasumovich, Marcel, A Band-Aid Solution to Inflation Targeting (May 1997). Bank of Canada Working Paper 97-11. Available at SSRN: https://ssrn.com/abstract=48276 or http://dx.doi.org/10.2139/ssrn.48276

Robert A. Amano

Bank of Canada & CREFE ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada
613-782-8827 (Phone)
613-782-7163 (Fax)

Richard Black

affiliation not provided to SSRN

Marcel Kasumovich (Contact Author)

Government of Canada - Financial Markets Department

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada
613-782-8729 (Phone)

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