05027oam 22010574 450 991082478910332120200520144314.01-4623-2348-01-4527-7227-41-282-84314-197866128431431-4518-7241-0(CKB)3390000000010617(EBL)1608103(MiAaPQ)EBC1608103(Au-PeEL)EBL1608103(CaPaEBR)ebr10368718(OCoLC)551147546(IMF)WPIEE2009094(IMF)WPIEA2009094(EXLCZ)99339000000001061720020129d2009 uf 0engur|n|---|||||txtrdacontentcrdamediacrrdacarrierInflation Targeting Under Imperfect Policy Credibility1st ed.Washington, D.C. :International Monetary Fund,2009.1 online resource (32 p.)IMF Working PapersDescription based upon print version of record.Includes bibliographical references.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; ReferencesFigures1. 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)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.IMF Working Papers; Working Paper ;No. 2009/094Inflation (Finance)Fiscal policyAgriculture: Aggregate Supply and Demand AnalysisimfDeflationimfDisinflationimfEconomic theory & philosophyimfEconomic TheoryimfEconomic theoryimfInflation targetingimfInflationimfMacroeconomicsimfMacroeconomics: ProductionimfMonetary economicsimfMonetary PolicyimfMonetary policyimfMoney and Monetary PolicyimfOutput gapimfPrice LevelimfPricesimfProduction and Operations ManagementimfProductionimfSupply and demandimfSupply shocksimfUnited StatesimfInflation (Finance)Fiscal policy.Agriculture: Aggregate Supply and Demand AnalysisDeflationDisinflationEconomic theory & philosophyEconomic TheoryEconomic theoryInflation targetingInflationMacroeconomicsMacroeconomics: ProductionMonetary economicsMonetary PolicyMonetary policyMoney and Monetary PolicyOutput gapPrice LevelPricesProduction and Operations ManagementProductionSupply and demandSupply shocks332.1DcWaIMFBOOK9910824789103321Inflation Targeting Under Imperfect Policy Credibility4264149UNINA