The Inflation-Targeting Debate

Front Cover
Ben S. Bernanke, Michael Woodford, National Bureau of Economic Research
University of Chicago Press, 2005 - Business & Economics - 458 pages
Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain.

In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.
 

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Contents

What Has Inflation Targeting Achieved?
11
Implementing Optimal Policy through InflationForecast Targeting
19
Optimal InflationTargeting Rules
93
Inflation Targeting PricePath Targeting and Output Variability
173
Imperfect Knowledge Inflation Expectations and Monetary Policy
201
Does Inflation Targeting Matter?
249
Limits to Inflation Targeting
283
Inflation Targeting in the United States?
311
Inflation Targeting in Transition Economies Experience and Prospects
353
Inflation Targeting and Sudden Stops
423
Contributors
447
Author Index
451
Subject Index
455
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About the author (2005)

Ben S. Bernanke is the Howard Harrison and Gabrielle Snyder Beck Professor of Economics and Public Affairs at Princeton University. He is a member of the board of governors of the United States Federal Reserve System, coauthor of two economics textbooks and of Inflation Targeting: Lessons from the International Experience. Michael Woodford is the Harold H. Helm ’20 Professor of Economics and Banking at Princeton University. He is the author of Interest and Prices: Foundations of a Theory of Monetary Policy and coeditor of the Handbook of Macroeconomics and Knowledge, Information, and Expectations in Modern Macroeconomics.