Working Paper

How should central banks define price stability?

Abstract: It is now generally accepted that the primary objective of central banks should be the maintenance of price stability. This paper considers the question of how central banks should define price stability. I address three specific questions. First, should central banks target broad or narrow measures of inflation? Second, should central banks target headline or core measure of inflation? And third, should central banks define price stability as prevailing at some positive measured rate of inflation?

Keywords: Inflation (Finance); Financial stability; Price indexes; Monetary policy;

JEL Classification: E5;

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Globalization Institute Working Papers

Publication Date: 2008

Number: 08

Pages: 37 pages

Note: Published as: Wynne, Mark A. (2009), "How Should Central Banks Define Price Stability?," in Designing Central Banks, eds. David Mayes and Geoffrey Wood (London: Routledge), 107-129.