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Unformatted text preview: y strategy; communication with the public about the plans and objectives of monetary policy makers. 5. Increased accountability of the CB for attaining its inflation objectives. 14 ► Given the breakdown of the relationship between monetary aggregate and inflation many countries have recently adopted inflation targeting as their monetary policy strategy in achieving price stability. New Zealand was the first country to adopt IT in 1990 Canada 1991 UK 1992 Sweden and Finland 1993 Austria and Spain in 1994 Israel, Chile, Brazil are others to adopt IT Turkey’s IT experience is coming up! 15 ► Advantages of Inflation Targeting: A stable money­inflation relationship is not necessary for its success. CB uses all the relevant information to determine the monetary policy. Simplicity and clarity of the target. Inflation target is easily understood by the public and highly transparent. An explicit numerical target increases the accountability of the CB. Time inconsistency problem is less likely. Increased stress on making policy transparent and on regular communica...
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This document was uploaded on 03/11/2014 for the course ECON 353 at Middle East Technical University.

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