ISSN:
1435-8131
Keywords:
Key words:Inflation targets, establishing credibility, precision of inflation control
;
JEL classification:E5, E63
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract. This paper develops a simple intertemporal model of inflation targets within a framework in which the public is uncertain about the dependability of policymakers, and in which policymakers do not perfectly control inflation. The framework is used to evaluate the effects of various parameters like the rate of time preference, initial reputation, and transparency (or precision of inflation control) on planned inflation, announced targets and the evolution of reputation and of inflationary expectations. The paper also shows that, when allowed to choose the precision of inflation control, more dependable policymakers will often choose relatively more precise control procedures. Implications for the type of inflation stabilization (cold turkey or gradual) chosen by dependable policymakers are also derived.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/s101010050005
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