Inflation-Targeting, Price-Path Targeting and Indeterminacy

FRB of St. Louis Working Paper No. 2004-007B

12 Pages Posted: 29 Jul 2005

See all articles by Robert Dittmar

Robert Dittmar

Citigroup, Inc. - CitiMortgage

William T. Gavin

Federal Reserve Bank of St. Louis - Research Division; University of Memphis Department of Economics

Date Written: December 2004

Abstract

In this paper, we examine the areas of indeterminacy in a flexible price RBC model with shopping time role for money and a central bank that uses an interest rate rule to target inflation and/or the price level. We present analytical results showing that, although inflation targeting often results in real indeterminacy, a price level target generally delivers a unique equilibrium for a relevant range of policy parameters.

Keywords: Inflation targeting, price-path targeting, indeterminacy

JEL Classification: C62, E52

Suggested Citation

Dittmar, Robert D. and Gavin, William T., Inflation-Targeting, Price-Path Targeting and Indeterminacy (December 2004). FRB of St. Louis Working Paper No. 2004-007B, Available at SSRN: https://ssrn.com/abstract=761984 or http://dx.doi.org/10.2139/ssrn.761984

Robert D. Dittmar (Contact Author)

Citigroup, Inc. - CitiMortgage ( email )

St. Louis, MO
United States

William T. Gavin

Federal Reserve Bank of St. Louis - Research Division ( email )

441 Locust Street
P. O. Box 442
St. Louis, MO 63166
United States
314 873-8422 (Phone)

HOME PAGE: http://www.gavinecon.com

University of Memphis Department of Economics ( email )

Memphis, TN 38152
United States

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