Inflation Targeting: A Victim of Its Own Success?

Christian Gillitzer and John Simon
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Christian Gillitzer: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: Since the introduction of inflation targeting, inflation expectations have become firmly anchored at target and there has been a flattening of the Phillips curve. These changes mean that a 'divine coincidence' between headline inflation and output gap stabilisation is less apparent than when inflation targeting was introduced. This has led some to call for a fundamental re-engineering of inflation-targeting regimes: either adopting explicit dual mandates or replacing headline inflation with a target inflation measure more closely related to domestic output gaps. We argue instead for an evolution in the practice of CPI inflation targeting. In practice, many central banks have already moved in this direction with the adoption of flexible inflation-targeting frameworks.

Keywords: inflation targeting; Phillips curve; Australia (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-ger, nep-mac and nep-mon
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Citations: View citations in EconPapers (25)

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Journal Article: Inflation Targeting: A Victim of Its Own Success (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2015-09

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