TITLE

Inflation Targeting

AUTHOR(S)
Gavin, William T.
PUB. DATE
April 2004
SOURCE
Business Economics;Apr2004, Vol. 39 Issue 2, p30
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Inflation targeting has worked well because it leads policymakers to debate, decide on, and communicate the inflation objective. In practice, this process has led the public to believe that the central bank has a long-term inflation objective. Inflation targeting has been successful, then, because the central bank decides on an objective and announces it, not because of a change in its day-to-day behavior in money markets or the way it reacts to news about unemployment or real gross domestic product. By deciding on an inflation rate and announcing it, the central bank is providing information the public needs in order to concentrate expectations on a common trend. The central bank gains control indirectly by creating information that makes it more likely that people will price things in a way that is consistent with the central bank's goal.
ACCESSION #
13194419

 

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