2007 | OriginalPaper | Chapter
Can, or Should, a Central Bank Inflation Target?
Author : Paul Davidson
Published in: Interpreting Keynes for the 21st Century
Publisher: Palgrave Macmillan UK
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Today’s conventional wisdom states that central banks will be very successful if they engage in developing a monetary policy that targets a specific rate of inflation. To understand whether a central bank can successfully pursue an inflation target policy we must inquire (1) what is the theory that informs us whether a central bank can target inflation? and (2) what is the mechanism that converts a specific monetary policy into achieving a specific rate of inflation?