Jump to ContentJump to Main Navigation
The Inflation-Targeting Debate$
Users without a subscription are not able to see the full content.

Ben S. Bernanke and Michael Woodford

Print publication date: 2005

Print ISBN-13: 9780226044712

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226044736.001.0001

Show Summary Details
Page of

PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2017. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use (for details see http://www.chicago.universitypressscholarship.com/page/privacy-policy).date: 22 May 2018

Optimal Inflation-Targeting Rules

Optimal Inflation-Targeting Rules

Chapter:
(p.93) 3 Optimal Inflation-Targeting Rules
Source:
The Inflation-Targeting Debate
Author(s):

Marc P. Giannoni

Michael Woodford

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226044736.003.0004

An increasingly popular approach to the conduct of monetary policy, since the early 1990s, has been inflation-forecast targeting. Under this general approach, a central bank is committed to adjust short-term nominal interest rates periodically so as to ensure that its projection for the economy's evolution satisfies an explicit target criterion. One benefit that is claimed for such an approach—and an important advantage, at least in principle, of inflation targeting over other policy rules—is the possibility of combining reasonable stability of the inflation rate (especially over the medium to long term) with optimal short-run responses to real disturbances of various sorts. This chapter shows that it is possible to derive robustly optimal monetary policy rule for optimizing models of the monetary transmission mechanism that incorporate a number of common features of recent empirical models: staggered wage- and price-setting; inflation inertia resulting from automatic indexation of wages and prices to a lagged price index; predetermined wage-setting, pricing, and spending decisions; and habit persistence in the level of real private expenditure.

Keywords:   inflation targeting, monetary policy, monetary transmission mechanism, inflation inertia, wages, prices, habit persistence, interest rates

Chicago Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us.