IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/32594.html
   My bibliography  Save this paper

Inflation Targets: Practice Ahead of Theory

Author

Listed:
  • Mervyn A. King

Abstract

Inflation targets were introduced well ahead of the development of the theory of inflation targeting. The practice was successful because it comprised a new set of procedures and institutions for setting monetary policy in a transparent and accountable fashion – “constrained discretion”; the later theory was less useful because it purported to be a theory of the determination of the price level. But inflation targeting does not constitute a new theory of the monetary transmission mechanism. The belief that it does led to the replacement of Milton Friedman’s dictum that “inflation is always and everywhere a monetary phenomenon” by the new dictum that “inflation is always and everywhere a transitory phenomenon”. This had unfortunate consequences during the recent inflation. The paper concludes with a discussion of the challenges facing inflation targets in the future.

Suggested Citation

  • Mervyn A. King, 2024. "Inflation Targets: Practice Ahead of Theory," NBER Working Papers 32594, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32594
    Note: ME
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w32594.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:32594. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.