Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234127 
Year of Publication: 
2017
Citation: 
[Journal:] Sveriges Riksbank Economic Review [ISSN:] 2001-029X [Issue:] 1 [Publisher:] Sveriges Riksbank [Place:] Stockholm [Year:] 2017 [Pages:] 83-103
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
In this article, we analyse the advantages and disadvantages of different ways of formulating inflation targets that involve an interval. We first review the international debate of ten to fifteen years ago on how an inflation target should best be designed. We then discuss the arguments in the current Swedish debate in light of this. One central conclusion is that if the inflation target is credible, monetary policy can be flexible and consider factors other than inflation – such as output and employment – even without an interval. A ‘tolerance band’ can open for more flexibility if it increases the credibility of the inflation target, but it could also reduce flexibility if it creates more inflation uncertainty or if ending up outside the interval is very costly. A ‘target range’ entails a major change to the monetary policy framework. It would allow the central bank to aim at different levels for inflation at different times. But as inflation expectations may become less firmly anchored, economic fluctuations may become greater.
Subjects: 
Monetary policy
inflation target
interval
JEL: 
E52
E58
Document Type: 
Article
Document Version: 
Published Version
Appears in Collections:

Files in This Item:
File
Size
402.88 kB





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