Inflation targeting and sudden stops

  • 24 Pages
  • 1.88 MB
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by
National Bureau of Economic Research , Cambridge, Mass
Inflation (Finance) -- Econometric models, Monetary policy -- Econometric m
StatementRicardo J. Caballero, Arvind Krishnamurthy.
GenreEconometric models.
SeriesNBER working paper series -- no. 9599., Working paper series (National Bureau of Economic Research) -- working paper no. 9599.
ContributionsKrishnamurthy, Arvind., National Bureau of Economic Research.
The Physical Object
Pagination24 p. ;
ID Numbers
Open LibraryOL17613021M
OCLC/WorldCa52282706

Inflation Targeting and Sudden Stops Ricardo J. Caballero, Arvind Krishnamurthy.

Description Inflation targeting and sudden stops PDF

Chapter in NBER book The Inflation-Targeting Debate (), Ben S. Bernanke and Michael Woodford, editors (p. - ) Conference held JanuaryPublished in December by University of Chicago PressCited by: Inflation targeting and sudden stops.

Cambridge, Mass.: National Bureau of Economic Research, © (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Ricardo J Caballero; Arvind Krishnamurthy; National Bureau of. Get this from a library. Inflation targeting and sudden stops.

[Ricardo J Caballero; Arvind Krishnamurthy; National Bureau of Economic Research.] -- Abstract: Emerging economies experience sudden stops in capital inflows. As we have argued in Caballero and Krishnamurthy (), having access to monetary policy during these sudden stops is useful.

Emerging economies experience sudden stops in capital inflows. As we have argued in Caballero and Krishnamurthy (), having access to monetary policy during these sudden stops is useful, but. Downloadable. Emerging economies experience sudden stops in capital inflows.

As we have argued in Caballero and Krishnamurthy (), having access to monetary policy during these sudden stops is useful, but mostly for insurance' rather than for aggregate demand reasons.

In this environment, a central bank that cannot commit to monetary policy choices will ignore the insurance aspect and. Downloadable. Sudden stops seem to create the perfect environment for disinflation, especially when central banks defend the exchange rate by increasing interest rates.

We propose a variation of the output gap model that incorporates the sudden stop shock. The use of the model in policy analysis shows that fear of floating is pro-cyclical and inflation targeting, countercyclical. The model is run for Brazil, Colombia, Korea and Thailand, the inflation targeting countries that have recently had sudden stops.

The three policy implications direct attention to the medium and long run. First, the central banks that are targeting inflation should Inflation targeting and sudden stops book.

Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate.

While the objective of controlling inflation enjoys wide support. III. Inflation Targeting for Emerging Markets 9. Inflation Targeting in Transition Economies: Experience and Prospects Jiri Jonas and Frederic S.

Mishkin Comment: Olivier Blanchard Discussion Summary Inflation Targeting and Sudden Stops Ricardo J. Caballero and Arvind Krishnamurthy Comment: Ben S. Bernanke Discussion Summary ContributorsPrice: $   Inflation targeting is a central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of inflation.

The benchmark used for inflation targeting is. Inflation Targeting, Sudden Stops, and the Cost of Fear of Floating 1 Javier Gómez2 First version: February 7, This version: February 9, Abstract Sudden stops seem to create the perfect environment for disinflation, especially when central banks.

Inflation Targeting in Transition Economies Experience and Prospects: Jiri Jonas, Frederic S. Mishkin (p. - ) (bibliographic info) Inflation Targeting and Sudden Stops: Ricardo J.

Caballero, Arvind Krishnamurthy (p. - ) (bibliographic info) (Working Paper version)Cited by: InflationTargetingandSuddenStops ero ArvindKrishnamurthy* Thisdraft:February19, Abstract Inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the medium-term and announces this inflation target to the public.

The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability, and price stability is achieved by controlling inflation. Prerequisites for inflation targeting 11 Advantages and disadvantages of inflation targeting 12 Success of inflation targeting 75 Merits of inflation targeting in South Africa 16 Trends in inflation targeting.

19 Credibility of the current inflation target 26 Summary 27 CHAPTER 3 RESEARCH METHODOLOGY 28 Price-path targeting, or “price-level targeting” as it is often called, implies that when the price level is above or below the target path, the objective of policy is to return it to the present target path.

This means that if prices move above the target path, then policy will need to bring them back down. This chapter examines whether a country is well advised to target inflation Author: Stephen G. Cecchetti. The book opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States.

The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.

Details Inflation targeting and sudden stops EPUB

Traditionally, policymakers have used such strategies as controlling the growth of the money supply or pegging the exchange rate to a stable currency. In recent years a promising new approach has emerged: publicly announcing and pursuing specific targets for the rate of inflation.

This book is the first in-depth study of inflation targeting.5/5(2). In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. Indeed, inflation targeters have argued that symmetrical inflation targeting helps central banks to stabilize real output, because in the face of a weak economy, an inflation targeter can ease more aggressively without being worried that the easing will cause inflation expectations to Size: 14KB.

Inflation-targeting central banks have a respectable track record at explaining their policy actions and corresponding inflation outturns.

Using a simple forward-looking policy rule and an assessment of inflation reports, we provide a new methodology for the empirical evaluation of consistency in central bank communication. We find that the three communication tools-inflation targets Cited by:   As an academic interested in monetary policy, several years ago I became intrigued by inflation targeting and went on to co-author a book and several other pieces about this approach.

4 As I continue to follow developments in the area, I must say, however, that discussions of inflation targeting in the American media remind me of the way some.

the inflation-targeting regime, and its two key intellectual roots–the absence of long-run trade-offs and the time-inconsistency problem. We conclude by providing a brief introduction to the way in. ABOUT THIS BOOK.

Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking.

As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. Cited by: A Stable International Monetary System Emerges: Inflation Targeting is Bretton Woods, Reversed Article in Journal of International Money and Finance 26(5) February with Reads.

LIMITS TO INFLATION TARGETING 2 an “intermediate target”. It is therefore likely to remain credible that the central bank is committed to its inflation target even through periods when its policies are having difficulties. This anchor is widely recognized not to be directly and im.

On balance, although lower long-run mean inflation signals that the central banks of emerging economies with inflation targeting are more inflation-averse, the costs of disinflation have not been lower than under other monetary regimes.

KrishnamurthyInflation targeting and sudden stops. Bernanke, M. Woodford (Eds.), The inflation Cited by: Beyond Inflation Targeting: Should Central Banks Target the Price Level.

By George A. Kahn O ver the last two decades, many central banks have adopted formal inflation targets to guide the conduct of monetary policy. During this period, inflation has come down in many countries and been relatively stable by historical standards.

This favor. decelerated sharply to a little over 1% in - the first year of inflation targeting. Since then, the annual rates of inflation in terms of the CPI and core CPI have remained around %, mostly within the target ranges.

On the surface, this record suggests that inflation targeting has been effective in sustaining price stability in Korea. Inflation is the increase in the prices of goods and services over time. Inflation cannot be measured by an increase in the cost of one product or service, or even several products or services.

Rather, inflation is a general increase in the overall price level of the goods and services in the economy. Federal Reserve policymakers evaluate. Limits to Inflation Targeting, pp Christopher Sims Inflation Targeting in the United States?, pp Marvin Goodfriend Inflation Targeting in Transition Economies Experience and Prospects, pp Jiri Jonas and Frederic Mishkin Inflation Targeting and Sudden Stops, pp Ricardo Caballero and Arvind Krishnamurthy.

Related Cited by: PRE CONDITIONS OF INFLATION TARGETING Başer, Şefika MA, Department of Economics Supervisor: Ass. Prof. Selin Sayek Böke December Inflation targeting regime is appeared as a new approach to achieve price stability objectives of the central banks.

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File Size: 1MB.Also, inflation targeting is consistent with democratic principles because the central bank is more accountable. "Because inflation targeting focuses on achieving the inflation target, it will lead to excessive output fluctuations" True, false, or uncertain?

False. Inflation targeting does not imply a sole focus on inflation.