Inflation Targeting with NAIRU Uncertainty and Endogenous Policy Credibility

Author/Editor:

Peter Isard ; Douglas Laxton ; Ann-Charlotte Eliasson

Publication Date:

January 1, 2001

Electronic Access:

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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:

English

Publication Date:

January 1, 2001

ISBN/ISSN:

9781451842418/1018-5941

Stock No:

WPIEA0072001

Format:

Paper

Pages:

41

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