Inflation Targeting: Lessons from the International Experience
by Ben S. Bernanke
from Princeton University Press
How should governments and central banks use monetary policy to create a healthy economy? Traditionally, policymakers have used such strategies as controlling the growth of the money supply or pegging the exchange rate to a stable currency. In recent years a promising new approach has emerged: publicly announcing and pursuing specific targets for the rate of inflation. This book is the first in-depth study of inflation targeting. Combining penetrating theoretical analysis with detailed empirical studies of countries where inflation targeting has been adopted, the authors show that the strategy has clear advantages over traditional policies. They argue that the U.S. Federal Reserve and the European Central Bank should adopt this strategy, and they make specific proposals for doing so.
The book begins by explaining the unique features and advantages of inflation targeting. The authors argue that the simplicity and openness of inflation targeting make it far easier for the public to understand the intent and effects of monetary policy. This strategy also increases policymakers' accountability for inflation performance and can accommodate flexible, even "discretionary," monetary policy actions without sacrificing central banks' credibility. The authors examine how well variants of this approach have worked in nine countries: Germany and Switzerland (which employ a money-focused form of inflation targeting), New Zealand, Canada, the United Kingdom, Sweden, Israel, Spain, and Australia. They show that these countries have typically seen lower inflation, lower inflation expectations, and lower nominal interest rates, and have found that one-time shocks to the price level have less of a "pass-through" effect on inflation. These effects, in turn, are improving the climate for economic growth. The authors warn, however, that the success of inflation targeting depends on operational details, such as how the targets are defined and when they are announced. They also show that inflation targeting is not a panacea that can make inflation perfectly predictable or reduce it without economic costs.
Clear, balanced, and authoritative, Inflation Targeting is a groundbreaking study that will have a major impact on the debate over the right monetary strategy for the coming decades. As a unique comparative study of what central banks actually do in different countries around the world, this book will also be invaluable to anyone interested in how economic policy is made.
Death of Inflation: Surviving and Thriving in the Zero Era
by Roger Bootle
from Nicholas Brealey Publishing
Imagine a world without inflation: prices rising in some years but falling in others; pay rising by 2 or 3% inthe good years, but static or falling in the bad ones; house prices are likely to fall as to rise; interest rates in the range of 2-4%. A purely imaginary world? No.
Interest and Inflation Free Money: Creating an Exchange Medium That Works for Everybody and Protects the Earth
The Role of Policymakers in Business Cycle Fluctuations
by Jim Granato
from Cambridge University Press
The book's central theme is that a policymaker's role is to enhance the public's ability to co-ordinate their price information, price expectations, and economic activities. This role is fulfilled when policymakers maintain inflation stability. Inflation persists less when an implicit or explicit inflation target is met. Granato and Wong argue that inflation persistence is reduced when the public substitutes the prespecified inflation target for past inflation. A by-product of this co-ordination process is greater economic stability. In particular, inflation stability contributes to greater economic output stability, including the potential for the simultaneous reduction of both inflation and output variability - inflation-output co-stabilization (IOCS). Granato and Wong use historical, formal, and applied statistical analysis of business-cycle performance in the United States for the 1960 to 2000 period. They find that during periods when policymakers emphasise inflation stability, inflation uncertainty and persistence were reduced.
The book's central theme is that a policymaker's role is to enhance the public's ability to coordinate their price information, price expectations, and economic activities. Granato and Wong argue that inflation persistence is reduced when the public substitutes the prespecified inflation target for past inflation.
From Bretton Woods to World Inflation: A Study of the Causes and Consequences
by Henry Hazlitt
from Regnery Pub
The International Transmission of Inflation (National Bureau of Economic Research Monograph)
by Michael R. Darby
from University Of Chicago Press
The authors construct a consistent data base of information for eight countries and design a theoretically sound model to test and evaluate competing hypotheses incorporating the most recent theoretical developments. Additional chapters address an impressive variety of issues that complement and corroborate the core of the study. They answer such questions as these: Can countries conduct an independent monetary policy under fixed exchange rates? How closely tied are product prices across countries? How are disturbances transmitted across countries?
The International Transmission of Inflation is an important contribution to international monetary economics in furnishing an invaluable empirical foundation for future investigation and discussion.
Monetary Policy with Very Low Inflation in the Pacific Rim (National Bureau of Economic Research-East Asia Seminar on Economics)
from University Of Chicago Press
The editors of this volume attribute low inflation and deflation in the region to a number of recent phenomena. Some of these episodes, they argue, may be linked to rapid growth on the supply side of economies. Here, inadequate demand policy can produce what is referred to as a "liquidity trap" in which the expectation of falling prices encourages agents to defer costly purchases, thereby discouraging growth. Low inflation rates can also be traced to the presence of a "zero-lower bound" on interest rates, as well as the inflation-targeting phenomenon. Targets have been set so low, the editors argue, that in some cases a few bad shocks lead to deflation.
Monetary Policy Report With Evidence 4th Report of Session 2005-06
Inflation, Exchange Rates, and the World Economy: Lectures on International Monetary Economics (Studies in Business and Society)
by W. Max Corden
from University Of Chicago Press
Inflation Targeting, Debt, and the Brazilian Experience, 1999 to 2003
from The MIT Press
Inflation targeting -- when central bank policies set specific inflation rate objectives -- is widely used by both developed and developing countries around the world (although not by the United States or the European Central Bank). This collection of original essays looks at how Brazil's policy of inflation targeting, coupled with a floating exchange rate, survived a series of severe economic shocks and examines the policy lessons that can be drawn from Brazil's experience.
After a successful start in early 1999, Brazil's policy regime had to manage mounting difficulties, including a sudden reversal of capital flows and its effects on the exchange rate and public debt, the contagion of Argentina's severe economic problems, a domestic energy crisis, and the political uncertainty of the 2002 presidential campaign. The contributors, prominent Brazilian and international economists, draw important lessons from Brazil's experience, including the necessity of accompanying monetary policy with fiscal improvement, the trade-offs involved in dollar-linked debt, the importance of fiscal institutions in an emerging market economy, and the importance of keeping inflation under control.
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