Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212029 
Year of Publication: 
2006
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 4/2006
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Inflation targeting involves using all available information in stabilizing inflation around some target rate (Svensson, 2003). Inflation is typically at the very end of the transmission mechanism and hence its determination is subject to much model uncertainty which the central bank will want to guard against using robust policies. Such robustness comes however with the cost of increased social loss under the most likely description of the economy. We show that with a sufficiently high degree of model uncertainty, adherence to the Friedman rule of increasing the money stock by k percent will be superior as the price paid for robustness is smaller.
Subjects: 
policy robustness
money growth targeting
inflation targeting
Friedman rule
JEL: 
E42
E52
E58
E61
Persistent Identifier of the first edition: 
ISBN: 
952-462-263-7
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.