Equilibrium multiplicity and uniqueness under inflation targeting

Alexandre B. Cunha

Macroeconomic Dynamics, 2026, vol. 30, -

Abstract: Macroeconomic models often have multiple equilibria. Nonetheless, a popular view on inflation targeting posits that this policy helps to coordinate agents’ expectations and actions. This paper provides a rationalization for this notion. I consider an infinitely repeated game, built on the Barro-Gordon model, in which the central bank incurs a fixed penalty whenever the actual inflation rate differs from the announced target and study how changes in the penalty impact its equilibria. I conclude that, in consonance with the aforementioned view, an inflation-targeting policy lessens the problem of equilibrium multiplicity. However, by itself, it is unlikely to achieve uniqueness.

Date: 2026
References: Add references at CitEc
Citations:

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

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:cup:macdyn:v:30:y:2026:i::p:-_43

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 ().