Is inflation targeting best-practice monetary policy?
By: Jon Faust, Dale W. Henderson.
Contributors: Henderson, Dale W.
Series: International finance discussion papers ;; no. 807; International finance discussion papers (Online) ;; no. 807.
Publisher: Federal Reserve Board
Published: 2004
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "We describe the inflation targeting framework (ITF) and compare it against hypothetical best-practice based on optimization.  The core requirements of the ITF are an explicit long-run inflation goal and a commitment to transparency in policymaking.  Advocates and practitioners of the ITF have made many contributions to clear goal setting and communication by central banks.  However, we contend that ITF communication policies both as advocated and practiced often have some elements that either obfuscate or, in some cases, explicitly contradict the dictates of optimization in a stabilization-policy paradigm.  In this paradigm, the central bank has an objective function that places weight on both inflation and output-gap stabilization and faces a conventional (exploitable) Phillips-curve trade-off.  We point out some problems that the ITF communication policy may generate in this setting.  Our analysis leads us to make four suggestions for communication policy intended to help central banks avoid these problems"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 8/2/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.