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Growth-Effects of Inflation Targeting: The Role of Financial Sector Development

Rangan Gupta ()

No 200610, Working Papers from University of Pretoria, Department of Economics

Abstract: The paper develops a dynamic general equilibrium monetary endogenous growth model. The closed economy model is inhabited by consumers, firms, a Cournotian monopolistically compet- itive banking system, besides, an inflation-targeting monetary authority, and, in turn, analyzes the effect of a tight monetary (disinflationary) policy on growth. We show that the effect of a lower inflation target on growth is ambiguous, with the ultimate effect depending on the initial levels of growth and the individual bank size, besides, a whole host of structural parameters defining the preferences and the production structure of the economy.

Keywords: Inflation Targeting; economic growth; financial sector development (search for similar items in EconPapers)
JEL-codes: E31 E44 E52 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2006-03
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Journal Article: Growth-Effects of Inflation Targeting: The Role of Financial Sector Development (2011) Downloads
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