Working Paper

Inflation-targeting, price-path targeting and indeterminacy

Abstract: 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.

Keywords: Monetary policy; Equilibrium (Economics);

Status: Published in Economics Letters, September 2005, 88(3), pp. 336-42

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2004

Number: 2004-007