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What Happens when Inflation Targets Change?

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  • Peter Stemp
  • Peter J. Stemp

Abstract

This paper considers an open-loop Nash game between independent monetary and fiscal authorities which seek to achieve conflicting objectives. The monetary authority is concerned solely with achieving a desired rate of inflation. The fiscal authority has multiple objectives defined by specific preference parameters. Using a calibrated model, a dynamic game theory approach is employed to analyze the impact of a change in inflation targets on the dynamic paths of public debt, the real money supply, government expenditure, and real interest rates.

Suggested Citation

  • Peter Stemp & Peter J. Stemp, 1997. "What Happens when Inflation Targets Change?," CESifo Working Paper Series 135, CESifo.
    • Handle: RePEc:ces:ceswps:_135
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    File URL: https://www.cesifo.org/DocDL/ces_wp135.pdf
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    Cited by:

    1. Hans-Werner Sinn, 1999. "Inflation and Welfare: Comment on Robert Lucas," NBER Working Papers 6979, National Bureau of Economic Research, Inc.
    2. Stemp, Peter J. & Herbert, Ric D., 2003. "Calculating short-run adjustments: Sensitivity to non-linearities in a representative agent framework," Journal of Economic Dynamics and Control, Elsevier, vol. 27(3), pages 357-379, January.

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