Inflation-targeting, price-path targeting and indeterminacy

In this paper, we examine the areas of indeterminacy in a flexible price RBC model with shopping time role for money and a central bank that uses an interest rate rule to target inflation and/or the price level. We present analytical results showing that, although inflation targeting often results i...

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Veröffentlicht in:Economics letters 2005-09, Vol.88 (3), p.336-342
Hauptverfasser: Dittmar, Robert D., Gavin, William T.
Format: Artikel
Sprache:eng
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Zusammenfassung:In this paper, we examine the areas of indeterminacy in a flexible price RBC model with shopping time role for money and a central bank that uses an interest rate rule to target inflation and/or the price level. We present analytical results showing that, although inflation targeting often results in real indeterminacy, a price level target generally delivers a unique equilibrium for a relevant range of policy parameters.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2005.03.003