Working Paper: CEPR ID: DP5915
Authors: Ernst Baltensperger; Andreas M. Fischer; Thomas J. Jordan
Abstract: Inflation targeting has become the monetary policy framework of the nineties. At the other extreme, several central banks have recently adopted key elements of the inflation targeter's toolkit, but at the same time they have made formal declarations that they are not inflation targeters. Such a position may appear surprising. It indirectly suggests that a reneging strategy is beneficial for some. The paper considers reasons why it may be advantageous for some central banks to distinguish themselves from the inflation targeting strategy. Most importantly, we argue that explicit inflation targets can potentially undermine the goal independence of a central bank.
Keywords: inflation targeting; goal independence; monetary policy
JEL Codes: E50; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| goal independence (L21) | inflation targets (E31) |
| goal independence (L21) | monetary framework (E42) |
| inflation targets (E31) | goal independence (L21) |
| goal independence (L21) | response to macroeconomic shocks (E39) |