Inflation Targets as a Stabilization Device

Lavan Mahadeva and Gabriel Sterne

Manchester School, 2002, vol. 70, issue 4, 619-650

Abstract: We highlight important aspects and consequences of using inflation targets during disinflation. Our illustrative theoretical model suggests annual revisions to short run are larger when the target is undershot than when the target is overshot. We confirm the result using cross–country panel estimates from a unique data set of inflation target misses in 60 countries in the 1990s. During disinflation the decision to change the target and policy instrument may sometimes be difficult to separate. Such short–term targets may be more akin to conditional forecasts than policy rules, but their publication nevertheless increases transparency and hence helps policymakers to achieve lower inflation.

Date: 2002
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/1467-9957.00303

Related works:
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:bla:manchs:v:70:y:2002:i:4:p:619-650

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1463-6786

Access Statistics for this article

Manchester School is currently edited by Keith Blackburn

More articles in Manchester School from University of Manchester Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().