Targeting Inflation with a Prominent Role for Money

Ulf Söderström ()

No 123, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: This paper demonstrates how a target for money growth can be beneficial for an inflation targeting central bank acting under discretion. Because the growth rate of money is closely related to the change in the interest rate and he growth of real output, delegating a money growth target to the central bank makes discretionary policy more inertial, leading to better social outcomes. This delegation scheme is also compared with other schemes suggested in the literature. Although other delegation schemes are sometimes more efficient, the results indicate that giving a prominent role to a money growth indicator can be a sensible strategy for monetary policy.

Keywords: Discretion; commitment; monetary policy inertia; inflation targeting; monetary targeting (search for similar items in EconPapers)
JEL-codes: E41 E51 E52 E58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2001-06-01
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Economica, 2005, pages 577-596.

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0123

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