A central bank pursuing the policy of inflation targeting aims to keep inflation as close as possible to a pre-announced value. But which 'inflation' should this be? Quarterly, annual, biennial? In theoretical models it is typically inflation during one period. We analyze how changing the period...

An inflation targeting central bank aims to stabilize the rate of inflation. But which 'inflation' should this be? Quarterly, annual, biennial? We analyze the effects on optimal monetary policy of increasing the period over which the inflation rate is defined. When inflation stabilization is the...