The Case for a Long-Run Inflation Target of Four Percent

Author/Editor: Laurence M. Ball
Publication Date: June 09, 2014
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Many central banks target an inflation rate near two percent. This essay argues that policymakers would do better to target four percent inflation. A four percent target would ease the constraints on monetary policy arising from the zero bound on interest rates, with the result that economic downturns would be less severe. This benefit would come at minimal cost, because four percent inflation does not harm an economy significantly.
Series: Working Paper No. 14/92
Subject(s): Inflation targeting | Inflation rates | Monetary policy | Central banks

Publication Date: June 09, 2014
ISBN/ISSN: 9781498395601/1018-5941 Format: Paper
Stock No: WPIEA2014092 Pages: 21
US$18.00 (Academic Rate:
US$18.00 )
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