Download to read offline
Uploaded byG Garcia
421 views
Woodford
This document discusses the advantages of central banks adopting explicit inflation targeting as the guiding principle for monetary policy. It argues that inflation targeting improves monetary policy in three key ways: 1) It facilitates public understanding of monetary policy by clearly defining the central bank's target, making policy decisions more transparent. 2) It improves policy effectiveness by anchoring public expectations about future inflation, since expectations strongly influence actual inflation outcomes. 3) It leads central banks to make decisions based on quantitative projections of the economy's future evolution, increasing the systematic data-driven nature of policy decisions.
