Bank Management White Papers
The Inflation-Output Variability Tradeoff and Price-Level Targets
Overview In this paper, we explain how the inflation-output variability tradeoff changes if the central bank chooses to target a predetermined path for the price level rather than an inflation rate. Our analysis is more transparent than Svensson’s because we do not try to distinguish between cases of commitment and discretion, nor do we consider the case where the central bank tries to achieve an unrealistic objective for output. We assume that the central bank cannot commit credibly to more than one period at a time. Since the central bank does not try to achieve unrealistically high levels of output, the steady state inflation rates are the same for both inflation and price-level targeting regimes.
| Publisher | Federal Reserve Bank of St. Louis | File Format | PDF, requires Acrobat Rdr 5 |
|---|---|---|---|
| Date Published | February 1999 | Downloads | 2 |
| Format | White Papers | ||
| Topics | |||
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