Discussion Topic 2000

Central Banking Seminar
October 16-27, 2000

Inflation Targeting

Focus

The decreasing reliability of the link between monetary aggregates in the 1980s and the more recent turbulent experience with fixed exchange rate regimes has led many countries to consider alternative nominal anchors for monetary policy. Since 1990, a number of countries have adopted explicit inflation targets as a framework for monetary policy: these include New Zealand, Canada, Australia, the United Kingdom, Spain, and Israel. The policy has recently been adopted by a growing number of developing countries as well. During the Central Banking Seminar, the discussion groups will address the question of what it means to adopt a policy of inflation targeting, and how such a policy works in practice.

Discussion outline and recommended reading

Lecturer: Kenneth Kuttner

Session 1: Overview of Inflation Targeting

Bernanke, Ben and Frederic Mishkin. 1996. "Inflation Targeting: A New Framework for Monetary Policy?" Journal of Economic Perspectives, 11:97-116.

Session 2: Inflation Targeting in Theory

King, Mervyn. 1997. "Changes in UK Monetary Policy: Rules and Discretion in Practice," Journal of Monetary Economics, 39:81-87.

Svensson, Lars. 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," European Economic Review, 41:1110-1146.

Session 3: Inflation Targeting in Practice

Kuttner, Kenneth N. and Adam S. Posen. 1999. "Does Talk Matter After All? Inflation Targeting and Central Bank Behavior," Federal Reserve Bank of New York Staff Report #88.

Mishkin, Frederic and Adam Posen. 1997. "Inflation Targeting: Lessons from Four Countries," Federal Reserve Bank of New York Economic Policy Review, 3:9-117.

Session 4: The Applicability of Inflation Targeting in Emerging Market Economies

Debelle, Guy. 2000. "The Viability of Inflation Targeting for Emerging Market Economies," Manuscript, Reserve Bank of Australia.

Mishkin, Frederic. 2000. "Inflation Targeting in Emerging Market Economies," NBER Working Paper #7618.