Strong Goal Independence and Inflation Targets

33 Pages Posted: 29 Dec 2006

See all articles by Ernst Baltensperger

Ernst Baltensperger

University of Bern - Institute of Economics

Andreas M. Fischer

Swiss National Bank; Centre for Economic Policy Research (CEPR)

Thomas Jordan

Swiss National Bank

Date Written: November 2006

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, weak, medium and strong goal independence

JEL Classification: E50, E52, E58

Suggested Citation

Baltensperger, Ernst and Fischer, Andreas M. and Jordan, Thomas, Strong Goal Independence and Inflation Targets (November 2006). CEPR Discussion Paper No. 5915, Available at SSRN: https://ssrn.com/abstract=954143

Ernst Baltensperger

University of Bern - Institute of Economics ( email )

Gesellschaftstrasse 49
Bern, CH-3012
Switzerland

Andreas M. Fischer (Contact Author)

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland
+41 1 631 3294 (Phone)
+41 1 631 3901 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Thomas Jordan

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland

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