Inflation and Price Level Targeting in a New Keynesian Model

Jagjit Chadha and Charles Nolan

Manchester School, 2002, vol. 70, issue 4, 570-595

Abstract: In a New Keynesian macroeconomic model under credible commitment, price level targeting dominates inflation targeting. But with sufficient inflation aversion the inflation–targeting central bank can produce quantitatively similar results to one targeting the price level. The current degree of inflation aversion demonstrated by the Bank of England may be sufficient to reap the benefits of price level targeting.

Date: 2002
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https://doi.org/10.1111/1467-9957.00301

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Working Paper: Inflation and Price Level Targeting in a New Keynesian Model (2002)
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