Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/65805 
Year of Publication: 
2008
Series/Report no.: 
Cardiff Economics Working Papers No. E2008/20
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
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

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