Optimal Inflation Targets, “Conservative” Central Banks, and Linear Inflation Contracts: Comment

Roel Beetsma and Henrik Jensen

No 98-11, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: Recently, Svensson (1997) has shown that a combination of state-contingent inflation targeting and central banker "conservatism" produces optimal monetary policy if employment is persistent. We argue that the state-contingent nature of the scheme may undermine its credibility. We then show that the optimal policy in Svensson's model can nevertheless be attained through state-independent delegation.

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Journal Article: Optimal Inflation Targets, "Conservative" Central Banks, and Linear Inflation Contracts: Comment (1999)
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