The Effectiveness of Central Bank Forward Guidance under Inflation and Price-Level Targeting
Stephen Cole ()
No 2016-06, Working Papers and Research from Marquette University, Center for Global and Economic Studies and Department of Economics
This paper examines the effectiveness of central bank forward guidance under inflation and price-level targeting monetary policies. The results show that the attenuation of the effects of forward guidance can be solved if a central bank switches from inflation targeting to price-level targeting. Output and inflation respond more favorably to forward guidance with price-level targeting than inflation targeting. A monetary policy rule that aggressively reacts to inflation and includes interest rate inertia narrows the performance gap between the two policy regimes. However, forward guidance with price-level targeting is still preferred to forward guidance with inflation targeting after performing multiple robustness checks.
Keywords: Forward Guidance; In ation Targeting; Price-Level Targeting; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E30 E31 E50 E52 E58 E60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sog
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Journal Article: The effectiveness of central bank forward guidance under inflation and price-level targeting (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:mrq:wpaper:2016-06
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