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Price level targeting and the delegation issue in an open economy

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  • Froyen, Richard T.
  • Guender, Alfred V.

Abstract

A weight-conservative central banker setting policy with discretion and stabilizing the real exchange-rate-adjusted (REX) price level and the output gap can replicate the behavior of the rate of REX inflation and the output gap under policy from a timeless perspective.

Suggested Citation

  • Froyen, Richard T. & Guender, Alfred V., 2014. "Price level targeting and the delegation issue in an open economy," Economics Letters, Elsevier, vol. 122(1), pages 12-15.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:1:p:12-15
    DOI: 10.1016/j.econlet.2013.10.027
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    References listed on IDEAS

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    1. Laurence M. Ball, 1999. "Policy Rules for Open Economies," NBER Chapters, in: Monetary Policy Rules, pages 127-156, National Bureau of Economic Research, Inc.
    2. Ester Faia & Tommaso Monacelli, 2008. "Optimal Monetary Policy in a Small Open Economy with Home Bias," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 721-750, June.
    3. Miles Parker, 2017. "Price-setting behaviour in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(3), pages 217-236, September.
    4. Philip Bunn & Colin Ellis, 2012. "Examining The Behaviour Of Individual UK Consumer Prices," Economic Journal, Royal Economic Society, vol. 122(558), pages 35-55, February.
    5. Philip Bunn & Colin Ellis, 2012. "How do Individual UK Producer Prices Behave?," Economic Journal, Royal Economic Society, vol. 122(558), pages 16-34, February.
    6. Jennifer V. Greenslade & Miles Parker, 2012. "New Insights into Price‐Setting Behaviour in the UK: Introduction and Survey Results," Economic Journal, Royal Economic Society, vol. 122(558), pages 1-15, February.
    7. Michael Woodford, 1999. "Commentary : how should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 277-316.
    8. Tatiana Kirsanova & Campbell Leith & Simon Wren-Lewis, 2006. "Should Central Banks Target Consumer Prices or the Exchange Rate?," Economic Journal, Royal Economic Society, vol. 116(512), pages 208-231, June.
    9. Svensson, Lars E O, 1999. "Price-Level Targeting versus Inflation Targeting: A Free Lunch?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 277-295, August.
    10. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
    11. Vestin, David, 2006. "Price-level versus inflation targeting," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1361-1376, October.
    12. Greenslade, Jennifer & Parker, Miles, 2010. "New insights into price-setting behaviour in the United Kingdom," Bank of England working papers 395, Bank of England.
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    Citations

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    Cited by:

    1. Alfred V Guender, 2009. "How Conservative Does The Central Banker Have To Be? On The Treatment Of Expectations Under Discretionary Policymaking," Australian Economic Papers, Wiley Blackwell, vol. 48(1), pages 34-49, March.
    2. Guender, Alfred V. & Oh, Do Yoon, 2006. "Price stability through price-level targeting or inflation targeting? A tale of two experiments," Journal of Economics and Business, Elsevier, vol. 58(5-6), pages 373-391.
    3. Richard T. Froyen & Alfred V. Guender, 2017. "What to Aim for? The Choice of an Inflation Objective when Openness Matters," Open Economies Review, Springer, vol. 28(1), pages 167-190, February.

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    More about this item

    Keywords

    Price level targeting; Real-exchange-rate adjusted price level; CPI; Domestic price level; Conservative central banker;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance

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