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Inflation targeting as a means of achieving disinflation

By Christian Saborowski

Abstract

In this paper, we take an analytical approach to examine possible adverse effects of the use of inflation targeting as a disinflation regime. The idea is that a strict interpretation of an inflation target may preserve inflationary distortions after price stability is attained. We show that such a policy not only creates a slump in output but may increase macroeconomic volatility substantially in a model in which wages are subject to a Taylor staggering structure

Topics: HJ
Publisher: University of Warwick, Department of Economics
Year: 2009
OAI identifier: oai:wrap.warwick.ac.uk:1323

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