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| Author: | Mankiw, G. Reis, R. |
| Title: | What measure of inflation should a central bank target? |
| Journal: | Journal of the European Economic Association
2003 : SEP, VOL. 1:5, p. 1058-1086 |
| Index terms: | Central banks Inflation Target search problem Price indices USA |
| Language: | eng |
| Abstract: | The authors assume that a central bank commits itself to maintaining an inflation target and then asks what measure of the inflation rate the central bank should use if it wants to maximize economic stability. They first formalizes this problem and examines its microeconomic foundations. When a numerical illustration of the problem is calibrated to U.S. data, one tentative conclusion is that a central bank that wants to achieve maximum stability of economic activity should use a price index that gives substantial weight to the level of nominal wages. |
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