Monetary policy in a new era brookings institution. Making sure it doesnt happen here, speech before the. Ben shalom bernanke was chairman of the board of governors of the federal reserve system from february 1, 2006, to january 31, 2014. Bernanke, 9780691086897, available at book depository with free delivery worldwide. Published in volume 11, issue 2, pages 97116 of journal of economic perspectives, spring 1997, abstract. During his tenure as chair, bernanke oversaw the federal reserves response to the late2000s financial crisis. Oct 12, 2017 former federal reserve chairman ben bernanke said the central bank needs to adopt pricelevel targeting, temporarily, to combat the next recession. This book is the first indepth study of inflation targeting. You called me a dove, well maybe in some respects i am, but on the other hand my inflation record is the best of any federal reserve chairman in the postwar. In an inflationtargeting framework, publicly announced mediumterm inflation targets provide a nominal anchor for monetary policy, while allowing the central bank some flexibility to help stabilize the real economy in the short run. Speech by mr ben s bernanke, member of the board of governors of the us federal reserve. Pdf since its first introduction in new zealand in 1990, inflation targeting has been successfully adopted in several industrialized countriescanada. The fed should have abandoned inflation targeting the economist. Lessons from the international experience kindle edition by bernanke, ben s.
The approach evolved gradually from earlier monetary policy strategies that followed the demise of the bretton woods fixedexchangerate systemmost directly, i believe, from the practices. The federal reserve and the financial crisis princeton. In an inflation targeting framework, publicly announced mediumterm inflation targets provide a nominal anchor for monetary policy, while allowing the central bank some flexibility to help stabilize the real economy in the short run. New zealand, the first formal inflation targeter, adopted the approach only in 1990. Publication date 1999 topics antiinflationary policies, monetary policy publisher. Bernanke is a distinguished fellow in residence with the economic studies program at the brookings institution, as well as a senior advisor to pimco and citadel. Federal reserve, suggested that trump fed chairman nominee jerome powell is likely to formally begin reexamining the feds target this year and that. I dont see anything magical about targeting 2 percent inflation, he told a conference in washington sponsored by the international monetary fund. As many countries currently think of adopting inflation targeting in one form or another, the arrival of this book could not be more timely. He was named time magazines person of the year in 2009 and was a professor of economics at princeton university prior to his career in public service. Inflation targeting involves mechanical, rulelike policymaking. Federal reserve officials have discussed adopting an explicit inflation target to help keep expectations in check, fed chairman ben bernanke said on wednesday, confirming reports in. The most important paragraph in ben bernankes new book. Despite inflation targeting s successes, it is no panacea.
Combining penetrating theoretical analysis with detailed empirical studies of countries where inflation targeting has been adopted, the authors show that the strategy has clear advantages over traditional policies. Congress appointed bernanke for his knowledge of how monetary policy contributed to the great depression and his belief in inflation targeting. Frb speech, bernankea perspective on inflation targeting. Bernanke suggested that he would be open to an increase in the central banks 2 percent inflation target. The 2011 decision to stick with inflation targeting doomed america to a decade of rockbottom interest rates. Economic fluctuations and growth, monetary economics. Barton hepburn professor of economics at the graduate school of business, columbia university, and former director of research at the federal reserve bank of new. Although his predecessor rejected inflation targeting, bernanke preferred a stated inflation objective, which he believed would bring about economic growth and stability. Inflation targeting is a framework for monetary policy characterised by the public announcement of official quantitative targets or target ranges for the. Federal reserve chair ben bernanke testified in a hearing on the humphreyhawkins semiannual monetary policy report. Jan 25, 2004 ben bernanke s essays on the great depression is a collection of 9 essays written in the 80s and 90s about the financial and labor markets during the 1930s.
A groundbreaking study that will be likely to have a major impact on the debate over the right monetary strategy for the coming years. Mishkin and a great selection of related books, art and collectibles available now at. In recent years, a number of industrialized countries have adopted a strategy for monetary p. There are a variety of theoretical arguments for ngdp targeting over inflation targeting, but its. Lessons from the international experience bernanke, ben s. The authors describe how this approach has been implemented in practice and argue that it is best understood as a broad framework for policy, which allows the central bank constrained discretion, rather than as an ironclad policy rule in the friedman. Over the past fifteen years, a significant number of industrialized and middleincome countries have adopted inflation targeting as a framework for. Or, if there is such a relationship, friedman added in his. An inflation target would be the capstone of bernankes crusade to improve the feds communications, an initiative. Bernanke open to raising inflation target fed struggles to.
The most important paragraph in ben bernankes new book vox. A substantial study of inflation targeting was published in 1999 by ben bernanke, thomas laubach, rick mishkin and adam posen. Bernanke and michael woodford is published by university of chicago press. Bernanke is the howard harrison and gabrielle snyder beck professor of economics and public affairs at princeton university.
Jeffrey frankel, in handbook of monetary economics, 2010. Mar 25, 2003 misconceptions about inflation targeting i would like to turn now, briefly, to comment on a few key misconceptions about inflation targeting that have gained some currency in the public debate. Oct 12, 2017 ben bernanke temporary pricelevel targeting. Ben bernanke predicts fed will discuss changing inflation. Mishkin t he worlds central bankers and their staffs meet regularly, in venues from basle to washington, to share ideas and discuss common problems. Inflation targeting, therefore, is not a robust monetarypolicy. Remarks before the annual washington policy conference, national association of business economists, washington, d. Abel, bernanke, and croushore present macroeconomic theory in a way that prepares students to analyze real macroeconomic data used by policy makers and researchers. Bernanke is howard harrison and gabrielle snyder beck professor of economics and public affairs at princeton university.
Thomas laubach is an economist at the federal reserve bank of kansas city. While expected to uphold the style of fiscal management established by greenspan, he brought certain important changes to the fed, mainly in regard to inflation. Bernanke near inflation target prize, but jobs a concern. Should central banks respond to movements in asset prices. Jun 22, 2011 federal reserve officials have discussed adopting an explicit inflation target to help keep expectations in check, fed chairman ben bernanke said on wednesday, confirming reports in recent weeks.
Reforming the feds toolkit and quantitative easing practices. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the czech republic, poland, and hungary. Yet a central tenet of inflation targeting is that price stability must be the primary longrun goal of monetary. Lessons from the international experience by ben s. Clear, balanced, and authoritative, inflation targeting is a groundbreaking study that will have a major impact on the debate over the right monetary strategy for the coming decades.
This study is part of a larger project on inflation targeting with ben bernanke and thomas laubach. Not surprisingly, the 200709 financial crisis has called into question the two principles, and led some to suggest that the it. A nominal gross domestic product ngdp level target along a 4 percent growth path would be an even more effective approach than inflation or pricelevel targeting, especially during adverse supply shocks. In practice, inflationtargeting central bankers usually respond to large temporary shocks in import prices for oil and other agricultural and mineral products by trying to exclude them from the measure of the targeted cpi. Use features like bookmarks, note taking and highlighting while reading inflation targeting. International experiences with different monetary policy regimes. There is no longrun tradeoff between inflation and unemployment. In recent years, a number of industrialized countries have adopted a strategy for monetary policy known as inflation targeting.
Inflation targeting should, and is intended to, appeal to historians, political scientists, internationalrelations students, politicians, central bankers, journalists, as well as to economists and to undergraduates at any level of sophistication. In this unusual event, bernanke revealed important background and insights into the central banks crucial actions during the worst financial. As the name suggests, this approach is characterized by the announcement of official inflation targets at one or more horizons, and by the explicit acknowledgment that low and. You called me a dove, well maybe in some respects i am, but on the other hand my inflation record is the best. The federal reserve and the financial crisis free pdf. Yet a central tenet of inlation targeting is that price stability must be the primary longrun goal of mon etary policy. Those opposed to the idea have noted, correctly, that the fed. He is a member of the board of governors of the united states federal reserve system, coauthor of two economics textbooks and of inflation targeting. The evolution to inflation targeting occurred because central banks, most. We discuss the potential of the inflationtargeting approach for making. Former federal reserve chairman ben bernanke said the central bank needs to adopt pricelevel targeting, temporarily, to combat the next recession. Apr 02, 2020 numerous economists, including ben bernanke, have argued that this policy is especially useful when interest rates are at zero. Should the federal reserve announce a quantitative inflation objective.
One of the more interesting developments in central banking in the past dozen years or so has been the increasingly widespread adoption of the monetary policy framework known as inflation targeting. They also show that inflation targeting is not a panacea that can make inflation perfectly predictable or reduce it without economic costs. Bernanke proposes fed adopt temporary pricelevel targeting. An alternative framework for monetary policy ben s. Even when the inflation target itself is set outside the central bank or by an outside agency with the cooperation of the central bank, for the most part inflationtargeting central banks themselves rather than outsiders such as the legislature. Perhaps these frequent meetings help explain why changes in the tactics and. The book the inflationtargeting debate, edited by ben s. The essays are essentially a synthesis of prior work with greater mathematical rigor. The federal reserve and the financial crisis free pdf, chm.
With a balanced treatment of both classical and keynesian economics, the comprehensive coverage makes it easy for instructors to align chapters to fit their own syllabi. One barrier to empirically assessing inflation targeting is its short historical record. Barton hepburn professor of economics at the graduate school of business, columbia university, and former director of research at the federal reserve bank of new york. Ben bernanke, who supports it policies, believes that it does. Inflation targeting an overview sciencedirect topics. Nov 19, 2015 in 2012, ben bernanke, chairman of the u. Bernanke served as chairman of the federal reserve from 2006 to 2014. In searching for relevant experiences, the student of inflation targeting is tempted to look to the post1975 monetary policy regimes of germany and switzerland.
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