Speed Limit Policies versus Inflation Targeting: A Free Lunch?

Inflation targeting is currently popular with central banks. Is this popularity justified? I investigate this question by comparing a speed limit policy and inflation targeting with a Lucas-type Phillips curve capturing output gap persistence. If the output gap is at least moderately persistent, a speed limit policy can: (1) partly eliminate the state-contingent inflation bias, and (2) reduce inflation variability at no output gap variability cost.

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Year of publication:	2008-09
Authors:	Hatcher, Michael
Institutions:	Economics Section, Cardiff Business School
Subject:	inflation targeting \| speed limit policy \| inflation bias \| discretion \| stabilisation

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Extent:	application/pdf
Series:	Cardiff Economics Working Papers. - ISSN 1749-6101.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number E2008/20 13 pages
Classification:	E50 - Monetary Policy, Central Banking and the Supply of Money and Credit. General ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005509760