How should governments and central banks use monetary policy to create
a healthy economy? 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. Combining penetrating theoretical
analysis with detailed empirical studies of countries where inflation
targeting has been adopted, the authors show that the strategy has
clear advantages over traditional policies. They argue that the U.S.
Federal Reserve and the European Central Bank should adopt this
strategy, and they make specific proposals for doing so. The book
begins by explaining the unique features and advantages of inflation
targeting. The authors argue that the simplicity and openness of
inflation targeting make it far easier for the public to understand
the intent and effects of monetary policy. This strategy also
increases policymakers' accountability for inflation performance and
can accommodate flexible, even "discretionary," monetary policy
actions without sacrificing central banks' credibility. The authors
examine how well variants of this approach have worked in nine
countries: Germany and Switzerland (which employ a money-focused form
of inflation targeting), New Zealand, Canada, the United Kingdom,
Sweden, Israel, Spain, and Australia. They show that these countries
have typically seen lower inflation, lower inflation expectations, and
lower nominal interest rates, and have found that one-time shocks to
the price level have less of a "pass-through" effect on inflation.
These effects, in turn, are improving the climate for economic growth.
The authors warn, however, that the success of inflation targeting
depends on operational details, such as how the targets are defined
and when they are announced. They also show that inflation targeting
is not a panacea that can make inflation perfectly predictable or
reduce it without economic costs. Clear, balanced, and authoritative,
Inflation Targeting is a groundbreaking study that will have a major
impact on the debate over the right monetary strategy for the coming
decades. As a unique comparative study of what central banks actually
do in different countries around the world, this book will also be
invaluable to anyone interested in how economic policy is made.
Les mer
Produktdetaljer
ISBN
9780691187396
Publisert
2018
Utgiver
Vendor
Princeton University Press
Språk
Product language
Engelsk
Format
Product format
Digital bok