Sacrifice Ratios and Inflation Targeting: The Role of Credibility

Nicolás de Roux and Marc Hofstetter

No 9325, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: Two recent papers (Goncalves and Carvalho, 2009; and Brito, 2010) hold contradictory views regarding the role of inflation targeting during periods of disinflation. The first paper claims that inflation targeting reduces sacrifice ratios-i.e., the ratio of output losses to the change in trend inflation-during disinflations; the second paper refutes this result. We show here that inflation targeting only matters if disinflations are slow. The credibility gains of a fast disinflation make inflation targeting irrelevant for reducing the output-inflation trade-off.

Keywords: Inflation Targeting; Disinflation; Monetary Policy; Sacrifice Ratios; Credibility. (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 E58 (search for similar items in EconPapers)
Pages: 22
Date: 2012-02-07
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://repositorio.uniandes.edu.co/bitstream/handle/1992/41017/dcede2012-03.pdf

Related works:
Journal Article: Sacrifice Ratios and Inflation Targeting: The Role of Credibility (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000089:009325

Access Statistics for this paper

More papers in Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE Contact information at EDIRC.
Bibliographic data for series maintained by Universidad De Los Andes-Cede ().