Price-level Targeting versus Inflation Targeting in a Forward-looking Model
Year: 2000
Type: preprint
Abstract: This paper examines a price-level target in a model with a forward-looking Calvo-Taylor Phillips curve. Contrary to conventional wisdom, it is found that price-level targeting leads to a better trade-off between inflation and output-gap variability than inflation targeting, when the central bank acts under discretion. In some cases, price-level targeting under dircretion results in the same equilibrium as inflation targeting under commitment.
Author: David Vestin
Institution: Stockholm University
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1778339093