Mechanisms for achieving monetary stability: inflation targeting versus the ERM

Canzoneri, M. B., Nolan, C. and Yates, T. (1997) Mechanisms for achieving monetary stability: inflation targeting versus the ERM. Journal of Money, Credit and Banking, 29(1), pp. 46-60. (doi:10.2307/2953685)

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Publisher's URL: http://dx.doi.org/10.2307/2953685

Abstract

First we modify the Barro-Gordon model so that a credibility-stabilization trade-off will remain even when a performance contract of the type envisaged by Walsh (1995) is imposed on the central bank governor. We do this by modeling a real interest rate bias along with the inflation bias. Then we discuss how various inflation penalties might actually be imposed on a central bank and ask whether "inflation targeting (supported by one or another of the penalties) is likely to bring a better resolution to the credibility-stabilization trade-off than the ERM.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Nolan, Professor Charles
Authors: Canzoneri, M. B., Nolan, C., and Yates, T.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Money, Credit and Banking
Publisher:Wiley
ISSN:0022-2879
ISSN (Online):1538-4616

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