| 1. |
- Faust, Jon, et al.
(författare)
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The Equilibrium Degree of Transparency and Control in Monetary Policy
- 1999
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- We examine a central bank's endogenous choice of degree of control and degree of transparency, under both commitment and discretion. Under commitment, we find that the deliberate choice of sloppy control is far less likely under a standard central-bank loss function than reported for a less standard loss function by Cukierman and Meltzer. Under discretoin, maximum degree of control is the only equilibrium. With regard to the degree of transparency, under commitment, a sufficiently patient bank with sufficiently low average and maximum transparency are equilibria. We argue that discretion is the more realistic transparency. A maximum feasible degree of control with a minimum degree of transparency is then a likely outcome. The Bundesbank and the Federal Reserve System are, arguably, examples of this outcome.
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| 2. |
- Faust, Jon, et al.
(författare)
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Transparency and Credibility : Monetary Policy with Unobservable Goals
- 1997
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- We define and study transparency, credibility, and reputation in a model where the central bank's characteristics are unobservable to the private sector and are inferred from the policy outcome. A low-credibility bank optimally conducts a more inflationary policy than a high-credibillity bank, in the sense that it induces higher inflation, but a less expansionary policy in the sense that it induces lower inflation and employment than expected. Increased transparency makes the bank's reputation and credibility more sensitive to its actions. This has a moderating influence on the bank's policy. Full transparency of the central bank's intentions is generally socially beneficial, but frequently not in the interest of the bank. Somewhat paradoxically, direct observability of idiosyncratic central bank goals removes the moderating incentive on the bank and leads to the worst equilibrium.
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| 3. |
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| 4. |
- Rudebusch, Glenn D., et al.
(författare)
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Eurosystem Monetary Targeting : Lessons from U.S. Data
- 1999
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- Using small empirical model of inflation, output, and money estimated on U.S. data, we compare the relative performance of monetary targeting and inflation targeting. The results show that monetary targeting would be quite inefficient, with both higher inflatoin and output variability. This is true even with a deterministic money demand formulation. in this framework, there is thus no support for the prominent role given to money growth in the Eurosystem's monetary policy strategy.
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| 5. |
- Rudebusch, Glenn D., et al.
(författare)
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Policy Rules for Inflation Targeting
- 1998
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- Policy rules that are consistent with inflation targeting are examined in a small macroeconomic model of the US economy. We compare the properties and outcomes of explicit "instrument rules" as well as "targeting rules." The latter, which imply implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that inflation forecasts are central for good policy rules under inflation targeting. Some simple instrument and target rules do remarkably well relative to the optimal rule; others, including some that are often used as representing inflation targeting, do less.
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| 6. |
- Svensson, Lars E.O.
(författare)
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Does the P* Model Provide any Rationale for Monetary Targeting?
- 1999
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- The so-called P* model is frequently used or referred to in discussions of monetary teargeting. This gives the impression that the P* model might provide some rationale for monetary targeting or for the monetary reference value used by the Eurosystem. The P* modelimplies that inflation is determined by the level of and changes in the "real money gap" (the deviation of current real balances from their long-run equilibrium level), and hence that the real money gap is an important indicator for future inflation. Nevertheless, the P* model does not seem to provide any rationale for either a Bundesbank-style money-growth target or a Eurosystem-style money-growth indicator.
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| 7. |
- Svensson, Lars E.O.
(författare)
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How Should Monetary Policy be Conducted in an Era of Price Stability?
- 1999
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- The paper discusses several issues related to how monetary policy should be conducted in an era of price stability. Low inflation (with base drift in the price level) and price-level stability (without such base drift) are compared, and a suitable loss function (corrseponding to flexible inflation targeting) is discussed, including the index and level for the inflation target. Three ways of maintaining price stability are examined, namely (1) a commitment to a simple instrument rule, (2) "forecast targeting," and (3) monetary targeting. Both (1) and (3) are found to be inferior to forecast targeting. The benefits of credibility (private inflatoin expectations coinciding with the inflation target) are discussed. Credibility improves the tradeoff between inflation variability, output-gap variability and instrument variability and makes it easier for the central bank to meet its inflation target. The threat of deflation and a liquidity trap is examined. Transparent inflation targeting and a contingency plan with emergency measures, including a coordinated fiscal and monetary expansion, are likely to avoid a liquidity trap, but also contribute to escaping from one if already trapped.
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| 8. |
- Svensson, Lars E.O.
(författare)
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Inflation Forecast Targeting : Implementing and Monitoring Inflation Targets
- 1996
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an intermediate target. Inflation forecast targeting simplifies both implementing and monitoring of monetary policy. The inflation forecast is actually an ideal intermediate target: it is most correlated with the goal, easier to control than the goal, more observable than the goal, and very transparent. Money growth targeting generally leads to higher inflation variability than inflation targeting. In the rare special cases when either money growth or the exchange rate is the best intermediate target, inflation forecast targeting automatically implies the relevant intermediate target.
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| 9. |
- Svensson, Lars E.O.
(författare)
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Inflation Targeting : Some Extensions
- 1997
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- Previous analysis of the implementation of inflation targeting is extended to monetary policy responses to different shocks, consequences of model uncertainty, effects of interest rate smoothing and stabilization, a comparison with nominal GDP targeting, and implications of forward-looking behavior. Model uncertainty, output stabilization, and interest rate stabilization or smoothing all call for a more gradual adjustment of the conditional inflation forecast toward the inflation target. The conditional inflation forecast is the natural intermediate target during inflation targeting.
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| 10. |
- Svensson, Lars E.O.
(författare)
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Inflation Targeting as a Monetary Policy Rule
- 1998
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- The purpose of the paper is to survey and discuss inflation targeting in the context of monetary policy rules. The paper provides a general conceptual discussion of monetary policy rules, attempts to clarify the essential characteristics of inflation targeting, compares inflation targeting to other monetary policy rules, and draws some conclusions for the monetary policy of the European System of Central Banks.
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