Optimal monetary policy under inflation targeting: Is zero the optimal perception of inflation inertia?

Recent research has suggested that in deriving optimal policy under discretion, policymakers should react as if there were no structural inflation persistence in order to improve welfare. This paper considers whether such a strong result extends to an inflation targeting central bank with a more general Phillips curve formulation. The findings indicate that if anything, a central banker that assumes a high degree of inflation inertia is often preferable.

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Year of publication:	2007
Authors:	Páez-Farrell, Juan
Publisher:	Cardiff : Cardiff University, Cardiff Business School
Subject:	Geldpolitik \| Diskretionäre Politik \| Inflation Targeting \| Theorie \| optimal monetary policy \| discretion \| uncertainty \| inflation persistence

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Series:	Cardiff Economics Working Papers ; E2007/17
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	537730486 [GVK] hdl:10419/83934 [Handle] RePEc:cdf:wpaper:2007/17 [RePEc]
Classification:	E31 - Price Level; Inflation; Deflation ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination ; E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
Source:	EconStor

Persistent link: https://www.econbiz.de/10010322789