The distributional impacts of inflation-targeting strategies

Inflation targeting has been the preferred monetary policy strategy since the early 1990s in an increasing number of countries, expanding from advanced to developing countries. The global financial crisis that burst in 2008 has not really induced a policy change in this regard. Simply, several central banks expanded their focus beyond price stability on the goods market, to consider also financial stability, although the definition of the latter remains problematic in theory as well as in practice. This chapter presents the essential characteristics of inflation targeting, which epitomize a revised version of monetarism à la Friedman. It then discusses the major shortcomings of it, both before and after the global financial crisis, notably with regard to income and wealth distribution.