EconPapers    
Economics at your fingertips  
 

What measure of inflation should a central bank target?

N. Gregory Mankiw () and Ricardo Reis

No 170, Working Paper Series from European Central Bank

Abstract: This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this problem and examines its microeconomic foundations. It then shows how the weight of a sector in the stability price index depends on the sector's characteristics, including size, cyclical sensitivity, sluggishness of price adjustment, and magnitude of sectoral shocks. When a numerical illustration of the problem is calibrated to U.S. data, one tentative conclusion is that the central bank should use a price index that gives substantial weight to the level of nominal wages. JEL Classification: E42, E52, E58

Keywords: inflation targeting; monetary policy (search for similar items in EconPapers)
Date: 2002-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp170.pdf (application/pdf)

Related works:
Journal Article: What Measure of Inflation Should a Central Bank Target? (2003) Downloads
Working Paper: What Measure of Inflation Should a Central Bank Target? (2003) Downloads
Working Paper: What Measure of Inflation Should a Central Bank Target? (2002) Downloads
Working Paper: What Measure of Inflation Should a Central Bank Target? (2002) 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:ecb:ecbwps:2002170

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

 
Page updated 2019-03-31
Handle: RePEc:ecb:ecbwps:2002170