MONETARY POLICY: CENTRAL BANK TRANSPARENCY AND INFLATION TARGETING

Djuro Benic ()
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Djuro Benic: University of Dubrovnik

Economic Thought and Practice, 2014, vol. 23, issue 1, 233-246

Abstract: The aim of monetary policy is to ensure the long-term price stability and short-term assistance in the stabilization of cyclical output movements. Monetary policy actions must avoid the time inconsistency problems and possible tendencies of economic policy makers regarding inflation so as to increase the aggregate demand and output. Acceptance of established rules instead of discretion in the 1980s proved to be insufficiently successful due to several reasons. The question that arises is determining the direction of monetary policy actions to achieve the abovementioned objectives and to avoid problems. The need for responsible activities of central bank, along with independence, transparency, and inflation targeting as nominal anchor, is considered and determined in the paper as a possible direction which leads to efficiency.

Keywords: monetary policy; time inconsistency; central bank; transparency; nominal anchor (search for similar items in EconPapers)
JEL-codes: E31 E58 (search for similar items in EconPapers)
Date: 2014
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