Arbeitspapier
Inflation Targeting versus Nominal Income Targeting
In this paper we analyze flexible inflation targeting and nominal income targeting as two different monetary strategies in a simple dynamic macromodel. Furthermore we analyze inflation targeting in a two-period time-lag version of the model. The key results of our paper are: First, for both targeting regimes optimal monetary policy response leads to a shock-dependent feedback rule. Second, a demand shock is completely offset by both monetary strategies. Third, in case of a supply shock there is a significant difference between the two different targeting regimes. Under inflation targeting the policy makers face a trade-off between inflation and output stabilization. This trade-off depends on the weight F the policy makers attached to output stabilization relative to inflation stabilization in the loss function. In contrast, under nominal income targeting policy makers face a constant trade-off between inflation and real output growth: An increase in inflation leads to a fall in real output growth by an equal amount. Finally we analyze inflation targeting in a two-period time-lag version of the model. The qualitative results about the trade-off between inflation and output growth remain the same as in the basic model without time lag.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 301
- Klassifikation
-
Wirtschaft
- Thema
-
Inflation targeting
nominal income targeting
optimal monetary policy
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Staudinger, Sylvia
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2000
- Handle
- Letzte Aktualisierung
- 10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Staudinger, Sylvia
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2000
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