Working Paper Series, Sveriges Riksbank (Central Bank of Sweden)
Price-level Targeting versus Inflation Targeting in a Forward-looking Model
Abstract: This paper examines a price-level target in a model with a
forward-looking Calvo-Taylor Phillips curve. Contrary to conventional
wisdom, it is found that price-level targeting leads to a better trade-off
between inflation and output-gap variability than inflation targeting, when
the central bank acts under discretion. In some cases, price-level
targeting under dircretion results in the same equilibrium as inflation
targeting under commitment.
Keywords: Monetary policy; Price-level targeting; Inflation targeting; (follow links to similar papers)
JEL-Codes: E52; E58; (follow links to similar papers)
37 pages, May 1, 2000
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