The Inflation-Targeting Debate

The Inflation-Targeting Debate

Ben S. Bernanke and Michael Woodford

Print publication date: 2013

ISBN: 9780226044712

Publisher: University of Chicago Press

Abstract

Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. This book explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The book opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.

Table of Contents

Introduction

Ben S. Bernanke and Michael Woodford

I Optimal Targets

3 Optimal Inflation-Targeting Rules

Marc P. Giannoni and Michael Woodford

5 Imperfect Knowledge, Inflation Expectations, and Monetary Policy

Athanasios Orphanides and John C. Williams

Critical Perspectives

6 Does Inflation Targeting Matter?

Laurence Ball and Niamh Sheridan

7 Limits to Inflation Targeting

Christopher A. Sims

9 Inflation Targeting in Transition Economies

Jiri Jonas and Frederic S. Mishkin

10 Inflation Targeting and Sudden Stops

Ricardo J. Caballero and Arvind Krishnamurthy