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Record Nr. |
UNINA9910824789103321 |
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Titolo |
Inflation Targeting Under Imperfect Policy Credibility |
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Pubbl/distr/stampa |
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Washington, D.C. : , : International Monetary Fund, , 2009 |
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ISBN |
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1-4623-2348-0 |
1-4527-7227-4 |
1-282-84314-1 |
9786612843143 |
1-4518-7241-0 |
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Edizione |
[1st ed.] |
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Descrizione fisica |
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1 online resource (32 p.) |
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Collana |
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Disciplina |
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Soggetti |
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Inflation (Finance) |
Fiscal policy |
Agriculture: Aggregate Supply and Demand Analysis |
Deflation |
Disinflation |
Economic theory & philosophy |
Economic Theory |
Economic theory |
Inflation targeting |
Inflation |
Macroeconomics |
Macroeconomics: Production |
Monetary economics |
Monetary Policy |
Monetary policy |
Money and Monetary Policy |
Output gap |
Price Level |
Prices |
Production and Operations Management |
Production |
Supply and demand |
Supply shocks |
United States |
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Lingua di pubblicazione |
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Formato |
Materiale a stampa |
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Livello bibliografico |
Monografia |
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Note generali |
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Description based upon print version of record. |
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Nota di bibliografia |
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Includes bibliographical references. |
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Nota di contenuto |
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Contents; I. Introduction; II. The Model; A. Inflation Process with Endogenous Credibility; A.1 Inflation equation-an expectations-augmented Phillips curve; A.2 Output Gap equation; A.3 Exchange rate-real interest rate parity equation; A.4 Monetary policy loss function; A.5 Note on calibration; III. Optimal Disinflation; A. Initial Condition; B. Disinflation Under Various Degrees of Credibility; IV. Optimal Responses to Shocks; A. Initial Conditions; B. Supply Shocks; C. Demand Shocks; V. Costs of Delaying Interest Rate Increase Under Imperfect Credibility; VI. Concluding Remarks; References |
Figures1. Disinflation with Equal Weights on Inflation, Output and Interest Rate Variability; 2. Disinflation with Lower Weights on Output and Interest Rate Variability; 3. Responses to Unfavorable and Favorable Supply Shocks (Positive Shock Circle; Negative Shock Triangle); 4. Responses to Positive and Negative Demand Shocks (Positive Shock Circle Negative Shock Triangle; 5. Cost of Delaying Interest Rate Hikes in Response to an Unfavorable Supply Shock in an Economy with High Inflation and Low Initial Credibility (No Delay Triangle; Delay Circle) |
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Sommario/riassunto |
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This paper presents a model for Inflation Targeting under imperfect policy credibility. It modifies the conventional model in three ways: an endogenous policy credibility process, by which monetary policy can gain or lose credibility over time; non-linearities in the inflation equation and in the credibility generating process; and an explicit loss function. The model highlights problems associated with the practice of setting a series of rigid near-term inflation targets. Also, unfavorable supply shocks pose a difficult problem: an appropriate response involves an interest rate increase, some loss of output, and a period of increased inflation. A delayed response can result in a prolonged period of stagflation. |
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