The Inflation-Targeting Debate
The Inflation-Targeting Debate

Author: Ben S. Bernanke

Publisher: University of Chicago Press

Published: 2007-11-01

Total Pages: 469

ISBN-13: 0226044734

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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. In Inflation Targeting, a distinguished group of contributors 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 volume 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.

Optimal Monetary Policy Under Bounded Rationality
Optimal Monetary Policy Under Bounded Rationality

Author: Jonathan Benchimol

Publisher: International Monetary Fund

Published: 2019-08-02

Total Pages: 52

ISBN-13: 1498324584

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The form of bounded rationality characterizing the representative agent is key in the choice of the optimal monetary policy regime. While inflation targeting prevails for myopia that distorts agents' inflation expectations, price level targeting emerges as the optimal policy under myopia regarding the output gap, revenue, or interest rate. To the extent that bygones are not bygones under price level targeting, rational inflation expectations is a minimal condition for optimality in a behavioral world. Instrument rules implementation of this optimal policy is shown to be infeasible, questioning the ability of simple rules à la Taylor (1993) to assist the conduct of monetary policy. Bounded rationality is not necessarily associated with welfare losses.

Robustly Optimal Monetary Policy with Near-rational Expectations
Robustly Optimal Monetary Policy with Near-rational Expectations

Author: Michael Woodford

Publisher:

Published: 2005

Total Pages: 46

ISBN-13:

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The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private-sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. The proposed method offers a way of avoiding the assumption that the central bank can count on private-sector expectations coinciding precisely with whatever it plans to do, while at the same time also avoiding the equally unpalatable assumption that the central bank can precisely model private-sector learning and optimize in reliance upon a precise law of motion for expectations. The main qualitative conclusions of the rational-expectations analysis of optimal policy carry over to the weaker assumption of near-rational expectations. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more history-dependent than if rational expectations are assumed.

Current Issues in Monetary Economics
Current Issues in Monetary Economics

Author: Taradas Bandyopadhyay

Publisher: Rowman & Littlefield

Published: 1990

Total Pages: 356

ISBN-13: 9780389209119

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This book brings together leading academics and researchers to make a timely contribution to our understanding of the key issues in the fast-developing field of monetary economics. It offers a thoroughly comprehensive and up-to-date treatment of major areas such as money supply and demand, interest rate determination, international transmission of inflation, public debt, stabilization of the economy, the rational expectations hypothesis and the relationship between money and economic development. The book will be essential reading for all undergraduate and graduate students of monetary economics and macroeconomic theory. Contents: Preface; Contributors; Introduction: Taradas Bandyopadhyay and Subrata Ghatak; Money demand and supply, M.J. Artis and M.K. Lewis; Money market operations of the Bank of England and the determination of interest rates, David T. Llewellyn; Real interest rates and the role of expectations, Kajal Lahiri and Mark Zaporowski; Public sector deficits and the money supply, P.M. Jackson; The international transmission of inflation, George Zis; A critique of monetary theories of the balance of payments; nihil ex nihilo, M.H.L. Burstein; A framework for the analysis of two-tier exchange markets with incomplete segmentation, Jagdeep S. Bhandari and Bernard Decaluwe; Rational expectations and monetary policy, Patrick Minford; Monetary policy and credibility, Paul Levine; Disinflation and wage-price controls, David A. Wilton; Monetary growth models: The role of money demand functions, Taradas Bandyopadhyay and Subrata Ghatak; Index.

NBER Macroeconomics Annual 2003
NBER Macroeconomics Annual 2003

Author: Mark Gertler

Publisher: Mit Press

Published: 2004

Total Pages: 432

ISBN-13: 9780262072533

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The NBER Macroeconomics Annual presents pioneering work in macroeconomics by leading academic researchers to an audience of public policymakers and the academic community. Each commissioned paper is followed by comments and discussion. This year's edition provides a mix of cutting-edge research and policy analysis on such topics as productivity and information technology, the increase in wealth inequality, behavioral economics, and inflation.