How to order
IMF Publications

Working Papers in full text
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 All


Other research-related activities and publications of the IMF can be found at IMF Research

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile



Inflation Targeting Under Imperfect Policy Credibility

Author/Editor: Alichi, Ali | Freedman, Charles | Johnson, Marianne | Kamenik, Ondra | Kisinbay, Turgut | Laxton, Douglas | Clinton, Kevin | Chen, Huigang
Authorized for Distribution: April 1, 2009
Electronic Access: Free Full Text (PDF file size is 1,850KB)
Use the free Adobe Acrobat Reader to view this PDF file.
 
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: This paper presents a model for Inflation Targeting under imperfect policy credibility. It modifies the conventional model in three ways: an endogenous policy credibility process, by which monetary policy can gain or lose credibility over time; non-linearities in the inflation equation and in the credibility generating process; and an explicit loss function. The model highlights problems associated with the practice of setting a series of rigid near-term inflation targets. Also, unfavorable supply shocks pose a difficult problem: an appropriate response involves an interest rate increase, some loss of output, and a period of increased inflation. A delayed response can result in a prolonged period of stagflation.
 
Order a print copy
Series: Working Paper No. 09/94
Subject(s): Inflation targeting | Emerging markets | Monetary policy | Disinflation | Demand | Price increases | Economic models
Author's keyword(s): monetary policy | credibility | disinflation
 
English  
    Published:   April 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009094   Pages:   30
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
Please address any questions about this title to publications@imf.org.