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Inflation Targeting with NAIRU Uncertainty and Endogenous Policy Credibility

Author/Editor: Isard, Peter | Laxton, Douglas | Eliasson, Ann-Charlotte
Authorized for Distribution: January 1, 2001
Electronic Access: Free Full Text (PDF file size is 1,409KB)
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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: Stochastic simulations are employed to compare performance of monetary policy rules in linear and nonlinear variants of a small macro model with NAIRU uncertainity under different assumptions about the way inflation expectations are formed. Cases in which policy credibility is ignored or treated as exogenous are distinguished from cases in which credibility and inflation expectations respond endogenuously policy credibility strengthens the case for forward-looking inflation forecast based rules relative to backward-looking Taylor rules.
 
Series: Working Paper No. 01/7
Subject(s): Inflation targeting | Monetary policy | Economic models
Author's keyword(s): Inflation targeting | monetary policy rules | credibility | NAIRU uncertainty
 
English  
    Published:   January 1, 2001        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA0072001   Pages:   40
    Price:   US$15.00
       
     
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