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The Case for a Long-Run Inflation Target of Four Percent

Laurence Ball ()

No 14/92, IMF Working Papers from International Monetary Fund

Abstract: Many central banks target an inflation rate near two percent. This essay argues that policymakers would do better to target four percent inflation. A four percent target would ease the constraints on monetary policy arising from the zero bound on interest rates, with the result that economic downturns would be less severe. This benefit would come at minimal cost, because four percent inflation does not harm an economy significantly.

Keywords: Central banks; Central banks and their policies; Monetary policy; Inflation; Inflation rates; Inflation targeting; Inflation Target, percent inflation, central bank, Monetary Policy (Targets, Instruments, and Effects), (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2014-06-09
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