PRICE-LEVEL TARGETING – A VIABLE ALTERNATIVE TO INFLATION TARGETING?
The recent financial crisis that has led some central banks reaching the zero lower bound of their interest rate to use unconventional monetary policy instruments, has brought to the forefront theacademic discussions on the shift from inflation targeting (IT) to price level targeting. This paper pro...
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| Format: | Article |
| Language: | English |
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Alexandru Ioan Cuza University of Iasi
2012-12-01
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| Series: | CES Working Papers |
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| Online Access: | http://cse.uaic.ro/WorkingPapers/articles/CESWP2012_IV4_POP.pdf |
| _version_ | 1818360691851001856 |
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| author | Iulian Vasile Popescu |
| author_facet | Iulian Vasile Popescu |
| author_sort | Iulian Vasile Popescu |
| collection | DOAJ |
| description | The recent financial crisis that has led some central banks reaching the zero lower bound of their interest rate to use unconventional monetary policy instruments, has brought to the forefront theacademic discussions on the shift from inflation targeting (IT) to price level targeting. This paper provides a comparative analysis on IT strategy and targeting the price level, assesses the implications and highlights the challenges of an eventual transition to a new monetary policy strategy. Balancing the advantages (mainly better anchored inflation expectations) and disadvantages (communication difficulties) generated by following a potential price-level targeting strategy and the necessary prerequisites for its functionality (predictive agents, fully familiar with the implications of such a strategy and with complete confidence in themonetary authority) has led us to the conclusion that there is no common acceptance that price level targeting strategy might replace the present IT framework. |
| first_indexed | 2024-12-13T21:04:49Z |
| format | Article |
| id | doaj.art-5a7035f01ed246f5a87b05628a8496ca |
| institution | Directory Open Access Journal |
| issn | 2067-7693 |
| language | English |
| last_indexed | 2024-12-13T21:04:49Z |
| publishDate | 2012-12-01 |
| publisher | Alexandru Ioan Cuza University of Iasi |
| record_format | Article |
| series | CES Working Papers |
| spelling | doaj.art-5a7035f01ed246f5a87b05628a8496ca2022-12-21T23:31:30ZengAlexandru Ioan Cuza University of IasiCES Working Papers2067-76932012-12-0144809823PRICE-LEVEL TARGETING – A VIABLE ALTERNATIVE TO INFLATION TARGETING?Iulian Vasile PopescuThe recent financial crisis that has led some central banks reaching the zero lower bound of their interest rate to use unconventional monetary policy instruments, has brought to the forefront theacademic discussions on the shift from inflation targeting (IT) to price level targeting. This paper provides a comparative analysis on IT strategy and targeting the price level, assesses the implications and highlights the challenges of an eventual transition to a new monetary policy strategy. Balancing the advantages (mainly better anchored inflation expectations) and disadvantages (communication difficulties) generated by following a potential price-level targeting strategy and the necessary prerequisites for its functionality (predictive agents, fully familiar with the implications of such a strategy and with complete confidence in themonetary authority) has led us to the conclusion that there is no common acceptance that price level targeting strategy might replace the present IT framework.http://cse.uaic.ro/WorkingPapers/articles/CESWP2012_IV4_POP.pdfprice-level targetinginflation targetinginflation expectationsdeflationzero-lower- bound |
| spellingShingle | Iulian Vasile Popescu PRICE-LEVEL TARGETING – A VIABLE ALTERNATIVE TO INFLATION TARGETING? CES Working Papers price-level targeting inflation targeting inflation expectations deflation zero-lower- bound |
| title | PRICE-LEVEL TARGETING – A VIABLE ALTERNATIVE TO INFLATION TARGETING? |
| title_full | PRICE-LEVEL TARGETING – A VIABLE ALTERNATIVE TO INFLATION TARGETING? |
| title_fullStr | PRICE-LEVEL TARGETING – A VIABLE ALTERNATIVE TO INFLATION TARGETING? |
| title_full_unstemmed | PRICE-LEVEL TARGETING – A VIABLE ALTERNATIVE TO INFLATION TARGETING? |
| title_short | PRICE-LEVEL TARGETING – A VIABLE ALTERNATIVE TO INFLATION TARGETING? |
| title_sort | price level targeting a viable alternative to inflation targeting |
| topic | price-level targeting inflation targeting inflation expectations deflation zero-lower- bound |
| url | http://cse.uaic.ro/WorkingPapers/articles/CESWP2012_IV4_POP.pdf |
| work_keys_str_mv | AT iulianvasilepopescu priceleveltargetingaviablealternativetoinflationtargeting |