Skip to Main content Skip to Navigation
Master Thesis

Inflation targeting, the zero lower bound and post-crisis monetary policy

Abstract : This paper addresses recent developments in monetary policy theory in the context of a binding Zero Lower Bound and discusses the possible evolution of monetary policy after the Great Recession. We start from Olivier Blanchard's suggestion that a higher inflation target and correspondingly higher interest rates would offer larger wiggle room for Central Banks to stimulate the economy through monetary easing without hitting the ZLB and might thus prove to be a desirable policy. Using a New-Keynesian DSGE framework and including positive steady state inflation, we investigate if having a higher permanent inflation target would improve welfare and find that this is unlikely. Furthermore, we address the possibility of having temporary higher inflation targets and the effect this could have on economic fundamentals. Finally, we discuss whether simple inflation targeting suffices or if monetary policy might evolve in the aftermath of the crisis towards including several objectives and/or instruments, so as to better respond to future economic downturns.
Document type :
Master Thesis
Complete list of metadata

Cited literature [35 references]  Display  Hide  Download
Contributor : École d'économie de la Sorbonne Paris 1 Panthéon-Sorbonne Connect in order to contact the contributor
Submitted on : Monday, March 18, 2013 - 11:18:48 AM
Last modification on : Friday, April 29, 2022 - 10:12:54 AM
Long-term archiving on: : Sunday, April 2, 2017 - 2:07:15 PM


  • HAL Id : dumas-00801712, version 1


Alexandru Ciungu. Inflation targeting, the zero lower bound and post-crisis monetary policy. Economics and Finance. 2012. ⟨dumas-00801712⟩



Record views


Files downloads