EconPapers    
Economics at your fingertips  
 

Should central banks raise their inflation targets? Some relevant issues

Bennett McCallum

Economic Quarterly, 2011, vol. 97, issue 2Q, 111-131

Abstract: Several arguments are relevant. (1) In the absence of the zero lower bound (ZLB), the optimal steady-state inflation rate, according to standard reasoning, lies between deflation at the steady-state real interest rate and the Calvo-model value of zero, with calibration indicating a larger weight on the latter. (2) An attractive modification of the Calvo equation would imply that the weight on the second of these should be zero. (3) There may be some scope for monetary policy to be effective even at the ZLB. (4) Elimination of currency is feasible and would remove the ZLB constraint. (5) Increasing target inflation would undermine the rationale for central bank independence and constitute an additional movement away from intertemporal discipline.

Keywords: Banks and banking, Central; Monetary policy; Inflation (Finance) (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.richmondfed.org/-/media/RichmondFedOrg ... /q2/pdf/mccallum.pdf Full text (application/pdf)

Related works:
Working Paper: Should Central Banks Raise their Inflation Targets? Some Relevant Issues (2011) Downloads
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:fip:fedreq:y:2011:i:2q:p:111-131:n:v.97no.2

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Economic Quarterly from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().

 
Page updated 2025-05-15
Handle: RePEc:fip:fedreq:y:2011:i:2q:p:111-131:n:v.97no.2