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

_IMF Working Papers, June 9, 2014_

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## Bibliographic details
- Authors: Laurence M. Ball
- Published: June 9, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498395601.001

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### Main argument
- Many central banks target an inflation rate near two percent.
- The 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, resulting in less severe economic downturns.
- This benefit would come at minimal cost because four percent inflation "does not harm an economy significantly."

### Key findings and implications
- Raising the long-run inflation target from two percent to four percent reduces the likelihood and severity of hitting the zero lower bound on nominal interest rates.
- Lower incidence of the zero bound implies monetary policy can respond more effectively in recessions, mitigating downturn severity.
- The trade-off is characterized as favorable: the macroeconomic costs of four percent inflation are minimal relative to the stabilizing benefits.

### Policy recommendation
- Policymakers should consider adopting a long-run inflation target of four percent to provide greater monetary policy space and reduce recession severity linked to the zero lower bound.

### Metadata and classification
- Author: Laurence M. Ball
- Date: June 9, 2014
- Series: Working Paper No. 2014/092
- Issue: 092
- Volume: 2014
- Pages: 21
- DOI: https://doi.org/10.5089/9781498395601.001
- ISBN: 9781498395601
- ISSN: 1018-5941
- Subject: Banking, Financial services, Inflation, Inflation targeting, Monetary policy, Prices, Real interest rates, Zero lower bound
- Keywords: economist, Europe, federal funds rate, Global, Inflation, inflation expectation, inflation low, inflation process, inflation rate, inflation rise, Inflation Target, Inflation targeting, inflation uncertainty, lower-than-average inflation, Monetary Policy, nominal interest rate, Real interest rates, recession, single-digit inflation, WP, Zero lower bound

*Source: IMF Working Papers — "The Case for a Long-Run Inflation Target of Four Percent" by Laurence M. Ball (June 9, 2014).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-case-for-a-long-run-inflation-target-of-four-percent-41625_