Optimal Inflation Targeting Rules / Marc P. Giannoni, Michael Woodford.

Format:

Book

Author/Creator:

Giannoni, Marc P.

Contributor:

National Bureau of Economic Research.

Woodford, Michael.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9939.

NBER working paper series no. w9939

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

This paper characterizes optimal monetary policy for a range of alternative economic models in terms of a flexible inflation targeting rule, with a target criterion that depends on the model specification. It shows which forecast horizons should matter, and which variables besides inflation should be taken into account, for each specification. The likely quantitative significance of the various factors considered in the general discussion is then assessed by estimating a small, structural model of the U.S. monetary transmission mechanism with explicit optimizing foundations. An optimal policy rule is computed for the estimated model, and shown to correspond to a multi-stage inflation-forecast targeting procedure. The degree to which actual U.S. policy over the past two decades has conformed to the optimal target criteria is then considered.

Notes:

Print version record

September 2003.