tag:blogger.com,1999:blog-19649274.post115617743432792872..comments2024-03-29T12:03:50.891+05:30Comments on The Leap Blog: Indian monetary reformAjay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-19649274.post-77390691423713997972014-10-11T08:01:35.580+05:302014-10-11T08:01:35.580+05:30Prescient stuff! Prescient stuff! Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-1156579345490606642006-08-26T13:32:00.000+05:302006-08-26T13:32:00.000+05:30Inflation targeting is in use in roughly 20 countr...Inflation targeting is in use in roughly 20 countries, not just NZ (which invented it). My sense is that it's worked pretty well. The promise of inflation targeting is that expectations are anchored, inflation becomes less persistent, GDP growth volatility goes down.<BR/><BR/>There is a preliminary literature which finds some interesting results. I think the facts suggest that (a) inflation persistence does go down with inflation targeting and (b) that `inflation compensation', or the gap between the return on nominal bonds when compared with inflation indexed bonds, goes down under inflation targeting. The UK is a favourite natural experiment for these kinds of papers, because it has the rich array of financial markets that generate all kinds of nice data both before and after inflation targeting was introduced.<BR/><BR/>Another strand of normative monetary economics is the link to the `Taylor principle'. Inflation targeting easily connects to having an inflation coefficient of more than 1, and thus having a stabilising monetary policy. (This is neither necessary nor sufficient, but there is a coherence between the Taylor principle and inflation targeting).Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-1156575266404427852006-08-26T12:24:00.000+05:302006-08-26T12:24:00.000+05:30I finally read Ila's utterly excellent recommendat...I finally read Ila's utterly excellent recommendations on breaking up RBI activities. But she seems to indicate (in her other columns as well) her preference for inflation target. What's your take on fixed inflation target as a monetary policy, if you have any? From what little I know, I didn't think it worked very well in New Zealand.Chandrahttps://www.blogger.com/profile/04763671243428875888noreply@blogger.com