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Inflation Target Zones as a Commitment Mechanism

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  • Felipe Schwartzman

Abstract

In a simple new keyenesian model of monetary policy under discretion constraining the Central Bank to put inflation within a pre-specified Inflation Target Zone can eliminate the inflation bias and, at least for certain parameter ranges, significantly reduce the stabilization bias. Also, it is possible to investigate what is the optimal Inflation Target Zone for different economies. These seem to depend of the structural parameters in a non-linear and often non-monotonic way.
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Suggested Citation

  • Felipe Schwartzman, 2020. "Inflation Target Zones as a Commitment Mechanism," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 3, pages 115-132.
    • Handle: RePEc:fip:fedreq:92732
    DOI: 10.21144/eq1060302
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    References listed on IDEAS

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    More about this item

    Keywords

    Inflation; Exchange Rates;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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