Do Inflation-Targeting Central Banks Implicitly Target the Price Level?
Data(s) |
29/07/2010
29/07/2010
01/12/2009
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Resumo |
This paper reports graphical and statistical evidence that the inflation targeting regimes in Canada and the UK - but not in Australia, New Zealand, or Sweden - actually resemble price-level targeting. In particular, the price level closely tracks the path implied by the inflation target, and the time-series predictions of the "bygones-are-bygones" version of inflation targeting are rejected by the data in favor of those implied by price-level targeting. These results indicate heterogeneity in the actual application of inflation targeting across countries and, for Canada and the UK, imply that the characterization of inflation targeting as a policy where shocks are accommodated is at odds with the data. Moreover, up to extent that their current policies already resemble price-level targeting, the welfare gains of replacing inflation with (explicit) price-level targeting are likely to be small. |
Identificador | |
Idioma(s) |
en |
Publicador |
Université de Montréal, Département de sciences économiques |
Relação |
Cahier de recherche #2009-15 |
Palavras-Chave | #Inflation-targeting #price-level targeting #unit-root tests #E3, E5 |
Tipo |
Article |