Abstract:

In a multi-period monetary policy model with time lags, intermediate targets, and perturbations in monetary policies, we discuss the relationship between inflation targeting and the efficiency of monetary policies. We show that, because of time lags and perturbations in in the realization of monetary policies, the central bank cannot estimate various shocks promptly and so cannot respond to shocks. As a result, low efficiency of monetary policies is unavoidable. Besides, under inflation targeting, it is difficult for the central bank to achieve the desirable optimal policy and solve the problem of low efficiency.[著者文摘]