UNSPECIFIED (1998) Inflation targeting as a way of precommitment. OXFORD ECONOMIC PAPERS-NEW SERIES, 50 (3). pp. 431-448. ISSN 0030-7653

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Abstract

This paper considers an institutional arrangement in which the government assigns a publicly-announced inflation target to an instrument-independent central bank, but retains the discretion to revise the inflation target after wages have been set. We argue that since this arrangement is transparent, it solves Canzoneri's private information problem, ensures perfect monitoring of the government, and makes reputational forces more effective. Cases are characterized in which, for this reason, inflation targeting mitigates the inflationary bias of monetary policy.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions
Journal or Publication Title:	OXFORD ECONOMIC PAPERS-NEW SERIES
Publisher:	OXFORD UNIV PRESS
ISSN:	0030-7653
Date:	July 1998
Volume:	50
Number:	3
Number of Pages:	18
Page Range:	pp. 431-448
Publication Status:	Published
URI:	http://wrap.warwick.ac.uk/id/eprint/15478

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