Mechanisms for Achieving Monetary Stability: Inflation Targeting Versus the Erm

JOURNAL OF MONEY, CREDIT, AND BANKING, Vol. 28 No. 4, February 1997

Posted: 30 Sep 1996

See all articles by Matthew B. Canzoneri

Matthew B. Canzoneri

Georgetown University

Charles Nolan

University of St. Andrews

Anthony Yates

Bank of England - Monetary Analysis

Multiple version iconThere are 2 versions of this paper

Abstract

First, we modify the Barro-Gordon model so that a credibility-stabilization tradeoff 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 tradeoff than the ERM.

JEL Classification: E58, E52, E61

Suggested Citation

Canzoneri, Matthew B. and Nolan, Charles and Yates, Anthony, Mechanisms for Achieving Monetary Stability: Inflation Targeting Versus the Erm. JOURNAL OF MONEY, CREDIT, AND BANKING, Vol. 28 No. 4, February 1997, Available at SSRN: https://ssrn.com/abstract=3364

Matthew B. Canzoneri (Contact Author)

Georgetown University ( email )

Washington, DC 20057
United States
202-687-5911 (Phone)
202-687-6102 (Fax)

Charles Nolan

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

Anthony Yates

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
695
PlumX Metrics