Inflation targeting as a means of achieving disinflation

Christian Saborowski

Journal of Economic Dynamics and Control, 2010, vol. 34, issue 12, 2510-2532

Abstract: In this paper, we take an analytical approach to examine possible adverse effects of the use of inflation targeting as a disinflation regime. The idea is that a strict interpretation of an inflation target may preserve inflationary distortions after price stability is attained. We show that such a policy not only creates a slump in output but may increase macroeconomic volatility substantially in a model in which wages are subject to a Taylor staggering structure. The policy implication is that the problems associated with an excessively rigid inflation targeting policy are even more severe during a disinflationary episode.

Keywords: Disinflation; Inflation; targeting; Wage; staggering (search for similar items in EconPapers)
Date: 2010
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Related works:
Working Paper: Inflation Targeting as a Means of Achieving Disinflation (2009)
Working Paper: Inflation Targeting as a Means of Achieving Disinflation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:34:y:2010:i:12:p:2510-2532

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