ISSN:
1573-708X
Keywords:
credibility
;
monetary policy
;
inflation targeting
;
structural breaks
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract In this paper we address the issue whether a switch to inflation targeting can help build monetary policy credibility and can substitute for a track record of low inflation. To this end, we empirically evaluate the success of inflation targeting in Canada, New Zealand and the United Kingdom and investigate to what extent the joint dynamic processes of inflation and nominal interest rates in these three countries have experienced a structural break at the time of the regime switch to inflation targeting. The experience of Canada, New Zealand and the United Kingdom is matched with the United States, Australia and Germany. We find that the effectiveness of the direct inflation targeting approach to quickly increase low-inflation credibility so far is ambiguous and that this strategy is not clearly superior to intermediate monetary strategies.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1023/A:1008223206085
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