Price-level Targeting versus Inflation Targeting in a Forward-looking Model

David Vestin

No 106, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: This paper examines a price-level target in a model with a forward-looking Calvo-Taylor Phillips curve. Contrary to conventional wisdom, it is found that price-level targeting leads to a better trade-off between inflation and output-gap variability than inflation targeting, when the central bank acts under discretion. In some cases, price-level targeting under dircretion results in the same equilibrium as inflation targeting under commitment.

Keywords: Monetary policy; Price-level targeting; Inflation targeting (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2000-05-01
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (86)

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