SIGNALING AND COMMITMENT: MONETARY VERSUS INFLATION TARGETING

Hans Gersbach and Volker Hahn

Macroeconomic Dynamics, 2006, vol. 10, issue 5, 595-624

Abstract: The article compares the social efficiency of monetary targeting and inflation targeting when central banks may have private information on shocks to money demand and the transparency solution is not feasible because of verifiability problems. Under inflation targeting and monetary targeting, central banks may have an incentive to signal their private information in order to influence the public's expectations about future inflation. We show that inflation targeting is superior to monetary targeting, as it makes it easier for central banks to commit to low inflation. Moreover, central banks that are weak on inflation prefer inflation targeting to monetary targeting.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: Signalling and Commitment: Monetary versus Inflation Targeting (2003)
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:cup:macdyn:v:10:y:2006:i:05:p:595-624_05

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().