I n the last decade or two, central banks all over the world have been quite successful in achieving low and stable in ation. Average annual in ation in the industrialized countries has fallen below 2 percent. Average in ation has not been so low since the 1950s, as shown in Table 1. In emerging countries, in ation is now the lowest since the 1960s (International Monetary Fund, 2003b). Thes...

This paper re-examines the relationship between in ation, in ation volatility and growth using cross-country panel data for the past 30 years. With regard to the level of in ation, we nd that in contrast to current ndings which are based on cross-sectional time-average regression comparisons, exploiting the time dimension of the data reveals a strong negative correlation between in ation and in...

This paper builds a general equilibrium model with working capital and currency substitution and uses this model to assess welfare gains from disin‡ation. It is found that welfare gains from disin‡ation are higher when the baseline in‡ation rate and the elasticity of substitution between foreign currency and domestic deposits are higher. Indeed the gains from disin‡ation can be quite large comp...

The implementation of explicit quantitative in°ation targets elucidates the assessment of credibility of future monetary policy. Here the explicit in°ation target is time-varying and stochastic with asymmetric information. It is shown that central bank independence promotes lower in°ation but not at the cost of increased output variability. Marked political instability and instrument dependence...

Seitz and Tödter argue, counter to Svensson, that the P ¤ model provides a rationale for money-growth targeting. In particular, they argue that " money growth targeting is a special form of in ‡ation forecast targeting based on a 'limited' information set. In contrast to 'full information' in ‡ation forecast targeting, money growth targeting is likely to be more robust under changing conditions...

This paper uses a structurally estimatedmacroeconometricmodel, denoted the MC model, to evaluate in ation targeting in the United States. Various interest rate rules are tried with differing weights on in ation and output, and various optimal control problems are solved using differing weights on in ation and output targets. Price-level targeting is also considered. The results show that 1) the...

Price level targeting (without base drift) and in‡ation targeting (with base drift) are compared with persistence in output (generated by sticky prices, for instance). Counter to conventional wisdom, price level targeting results in lower short-run in‡ation variability than in‡ation targeting (if output is at least moderately persistent). Price level targeting also eliminates any average in‡ati...

This paper introduces a new model of trend in‡ation. In contrast to many earlier approaches, which allow for trend in‡ation to evolve according to a random walk, ours is a bounded model which ensures that trend in‡ation is constrained to lie in an interval. The bounds of this interval can either be …xed or estimated from the data. Our model also allows for a time-varying degree of persistence i...