Central banks in developing countries should consider targeting nominal GDP

Pranjul Bhandari, Jeffrey Frankel 21 August 2014

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Central banks still seek transparent and credible communication. But signalling intentions, through forward guidance or some degree of commitment to an intermediate target, poses a difficult tradeoff. The advantages of transparency and credibility versus the disadvantages of waking up one day to find that unexpected developments have turned past statements into unwanted constraints on current monetary policy.

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Topics:  Monetary policy

Tags:  inflation targeting, emerging markets, NGDP targeting

The evolving effectiveness of UK’s monetary policy

Colin Ellis, Haroon Mumtaz, Pawel Zabczyk 06 August 2014

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Over the past five decades, major industrialised economies underwent deep structural changes. These typically included dramatic shifts in macroeconomic policy and globalisation-induced changes in competition, technological advances, and financial innovation. This raises several concerns for policymakers, including whether the channels through which monetary policy affects the economy have changed over time, and what that might mean for how policy should be conducted.

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Topics:  Europe's nations and regions Monetary policy

Tags:  inflation targeting, UK, policy shocks

The euro crisis: Muddling through, or on the way to a more perfect euro union?

Joshua Aizenman 03 July 2014

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The short history of the Eurozone has been remarkable and unprecedented – the euro project has moved from the planning board to a vibrant currency within less than ten years. Otmar Issing’s optimistic speech in 2006 reflects well the buoyant assessment of the first decade of the euro – an unprecedented formation of a new currency without a state.1 Observers viewed the rapid acceptance of the euro as a viable currency and the deeper financial integration of the Eurozone and the EU countries as stepping stones toward a stable and prosperous Europe.

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Topics:  Institutions and economics International finance Monetary policy

Tags:  Germany, ECB, eurozone, inflation targeting, euro, institutions, Eurozone crisis, GIIPS

Inflation targeting vs price-level targeting: A new survey of theory and empirics

Michael Hatcher, Patrick Minford 11 May 2014

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Price stability is the key goal of almost every central bank in the world. But does that mean stable price levels or inflation rates? The main difference between inflation targeting and price-level targeting is the consequence of missing the target.

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Topics:  Monetary policy

Tags:  inflation targeting, price-level targeting, rational expectation, zero bound

Monetary policy in the UK: Time for change?

David Cobham 16 September 2013

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Before the Global Crisis it seemed as though the problems of monetary policy in the UK had been solved:

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Topics:  Monetary policy

Tags:  inflation targeting, Bank of England, UK, QE

Is the Riksbank neglecting the price-stability objective, counteracting full employment, and increasing household debt?

Lars E.O. Svensson 09 September 2013

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How do we know whether or not the Riksbank is neglecting the price-stability objective? Could it be that the Riksbank is not only neglecting the price-stability objective but is also counteracting the Riksdag’s and the Government’s full-employment objective as well as increasing household indebtedness?

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Topics:  Monetary policy

Tags:  inflation targeting, Riksbank

The case for 4% inflation

Laurence Ball 24 May 2013

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Many central banks have adopted a common policy – an inflation target near 2%. These central banks include the Fed (which calls it a ‘long run goal’), the ECB (which targets inflation ‘below, but close to 2%’) and the central banks of most other advanced economies.

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Topics:  Monetary policy

Tags:  inflation targeting, 2%

Is inflation targeting dead? Central banking after the Crisis

Lucrezia Reichlin, Richard Baldwin 14 April 2013

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Before the Crisis, inflation targeting had become the de facto standard framework for monetary policy. Even non-inflation targeters like the ECB and the Federal Reserve built their monetary policy around the idea of commitment to a quantitative objective for medium-term inflation.

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Topics:  EU institutions Macroeconomic policy

Tags:  inflation targeting, central bank independence, quantitative easing

Central banks can phase in nominal GDP targets without damaging the inflation anchor

Jeffrey Frankel 19 December 2012

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The time is right for the world’s central banks to reconsider the framework they use in conducting monetary policy. The US Federal Reserve and the ECB are still grappling with sustained economic weakness, despite years of low interest rates. In Japan, Shinzō Abe, the new prime minister from the Liberal Democratic Party (LDP), was elected on the promise of a new, more expansionary monetary policy (Financial Times 2012). In the UK, Mark Carney, the incoming Governor of the Bank of England, is open to new thinking.

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Topics:  Monetary policy

Tags:  inflation targeting, monetary policy, nominal GDP targeting

Monetary policy in Latin America: Where are we going?

Christian Daude 10 December 2012

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Inflation targeting has served countries in Latin America well . They have achieved macroeconomic stability by reducing inflation and the pass-through of external shocks such as oil price and exchange rate fluctuations (cf. Mishkin and Schmidt-Hebbel 2007).

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Topics:  Macroeconomic policy Monetary policy

Tags:  inflation targeting, Latin America, Central Banks, foreign exchange, Brazil, Chile, Mexico, Colombia, Peru

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