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- Title
Is there a case for higher inflation targets?
- Abstract
In recent years several observers have suggested that higher inflation targets might be economically beneficial. We examine the case for this, but find it unconvincing. There has been a large fall in the risk premia embedded in government bond yields over the past 25 years. Higher inflation targets would risk reversing some of these gains. We also doubt that higher inflation targets would yield the additional policy flexibility that is sometimes claimed. Nevertheless, we do detect a shift by central banks over recent years towards more tolerance of inflation risks at the margin - as seen in the adoption of 'forward guidance' and more 'flexible' inflation targeting.
- Subjects
INFLATION targeting; PRICE inflation; GOVERNMENT securities; INFLATION risk; EFFECT of inflation on the banking industry; CENTRAL banking industry
- Publication
Economic Outlook, 2014, Vol 38, Issue 2, p21
- ISSN
0140-489X
- Publication type
Article
- DOI
10.1111/1468-0319.12080