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Title:Speed limit policies versus inflation targeting: A free lunch? PDF Logo
Authors:Hatcher, Michael C.
Issue Date:2008
Series/Report no.:Cardiff Economics Working Papers E2008/20
Abstract:Inflation targeting is currently popular with central banks. Is this popularity justified? I investigate this question by comparing a speed limit policy and inflation targeting with a Lucas-type Phillips curve capturing output gap persistence. If the output gap is at least moderately persistent, a speed limit policy can: (1) partly eliminate the statecontingent inflation bias, and (2) reduce inflation variability at no output gap variability cost.
Subjects:inflation targeting
speed limit policy
inflation bias
discretion
stabilisation
JEL:E50
E52
E58
Document Type:Working Paper
Appears in Collections:Cardiff Economics Working Papers

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