A Model for Full-Fledged Inflation Targeting and Application to Ghana

 
Author/Editor: Alichi, Ali ; Clinton, Kevin ; Dagher, Jihad ; Kamenik, Ondra ; Laxton, Douglas ; Mills, Marshall
 
Publication Date: January 01, 2010
 
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Summary: A model in which monetary policy pursues full-fledged inflation targeting adapts well to Ghana. Model features include: endogenous policy credibility; non-linearities in the inflation process; and a policy loss function that aims to minimize the variability of output and the interest rate, as well as deviations of inflation from the long-term low-inflation target. The optimal approach from initial high inflation to the ultimate target is gradual; and transitional inflation-reduction objectives are flexible. Over time, as policy earns credibility, expectations of inflation converge towards the long-run target, the output-inflation variability tradeoff improves, and optimal policy responses to shocks moderate.
 
Series: Working Paper No. 10/25
Subject(s): Central banks | Disinflation | Economic models | External shocks | Ghana | Inflation rates | Inflation targeting | Low-income developing countries | Monetary policy | Public information | Transparency

 
English
Publication Date: January 01, 2010
Format: Paper
Stock No: WPIEA2010025 Pages: 30
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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