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Comparing inflation and price level targeting: the role of forward guidance and transparency

Seppo Honkapohja () and Kaushik Mitra

No 9/2015, Research Discussion Papers from Bank of Finland

Abstract: We examine global dynamics under learning in New Keynesian models with price level targeting that is subject to the zero lower bound. The role of forward guidance is analyzed under transparency about the policy rule. Properties of transparent and non-transparent regimes are compared to each other and to the corresponding cases of inflation targeting. Robustness properties for different regimes are examined in terms of the domain of attraction of the targeted steady state and volatility of inflation, output and interest rate. We analyze the effect of higher inflation targets and large expectational shocks for the performance of these policy regimes.

JEL-codes: E63 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2015-04-07
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Citations: View citations in EconPapers (2) Track citations by RSS feed

Published in Published in Manchester School, Volume 83, Issue Supplement S2, pages 27–59, September 2015

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Journal Article: Comparing Inflation and Price-Level Targeting: The Role of Forward Guidance and Transparency (2015) Downloads
Working Paper: Comparing Inflation and Price Level Targeting: the Role of Forward Guidance and Transparency (2015) Downloads
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