Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of contributors
- 1 Introduction
- 2 Welcome remarks: a Norwegian perspective
- 3 Reflections on inflation targeting
- 4 Inflation targeting at twenty: achievements and challenges
- 5 Inflation targeting twenty years on: where, when, why, with what effects and what lies ahead?
- 6 How did we get to inflation targeting and where do we need to go to now? A perspective from the US experience
- 7 Inflation control around the world: why are some countries more successful than others?
- 8 Targeting inflation in Asia and the Pacific: lessons from the recent past
- 9 Inflation targeting and asset prices
- 10 The optimal monetary policy instrument, inflation versus asset price targeting, and financial stability
- 11 Expectations, deflation traps and macroeconomic policy
- 12 Heterogeneous expectations, learning and European inflation dynamics
- 13 Inflation targeting and private sector forecasts
- 14 Inflation targeting, transparency and inflation forecasts: evidence from individual forecasters
- 15 Gauging the effectiveness of quantitative forward guidance: evidence from three inflation targeters
- 16 Macro-modelling with many models
- 17 Have crisis monetary policy initiatives jeopardised central bank independence?
- 18 Inflation targeting: learning the lessons from the financial crisis
- 19 The financial crisis as an opportunity to strengthen inflation-targeting frameworks
- 20 ‘Leaning against the wind’ is fine, but will often not be enough
- 21 Inflation targeting, capital requirements and ‘leaning against the wind’: some comments
- Index
21 - Inflation targeting, capital requirements and ‘leaning against the wind’: some comments
Published online by Cambridge University Press: 05 October 2010
- Frontmatter
- Contents
- List of figures
- List of tables
- List of contributors
- 1 Introduction
- 2 Welcome remarks: a Norwegian perspective
- 3 Reflections on inflation targeting
- 4 Inflation targeting at twenty: achievements and challenges
- 5 Inflation targeting twenty years on: where, when, why, with what effects and what lies ahead?
- 6 How did we get to inflation targeting and where do we need to go to now? A perspective from the US experience
- 7 Inflation control around the world: why are some countries more successful than others?
- 8 Targeting inflation in Asia and the Pacific: lessons from the recent past
- 9 Inflation targeting and asset prices
- 10 The optimal monetary policy instrument, inflation versus asset price targeting, and financial stability
- 11 Expectations, deflation traps and macroeconomic policy
- 12 Heterogeneous expectations, learning and European inflation dynamics
- 13 Inflation targeting and private sector forecasts
- 14 Inflation targeting, transparency and inflation forecasts: evidence from individual forecasters
- 15 Gauging the effectiveness of quantitative forward guidance: evidence from three inflation targeters
- 16 Macro-modelling with many models
- 17 Have crisis monetary policy initiatives jeopardised central bank independence?
- 18 Inflation targeting: learning the lessons from the financial crisis
- 19 The financial crisis as an opportunity to strengthen inflation-targeting frameworks
- 20 ‘Leaning against the wind’ is fine, but will often not be enough
- 21 Inflation targeting, capital requirements and ‘leaning against the wind’: some comments
- Index
Summary
It is a great privilege to have been invited to this timely conference to discuss an issue of considerable importance.
Did the inflation-targeting regime play any role in setting the stage for the current crisis?
The current financial crisis has several causes, and it would be a mistake to focus on a single factor. At first sight, however, monetary policy was too loose in several countries, and, as a result, housing and credit market bubbles were allowed to develop. Had interest rates been higher during the boom, it is plausible that the bubbles would have been more muted, and, therefore, the damage caused to the real economy when the bubbles eventually burst would probably have been more limited. Moreover, interest rates would have been higher when the bubble burst, so there would have been more scope to cut them in an attempt to stimulate the economy before having to resort to the largely untested policy of quantitative easing.
Note that the inappropriate monetary policy does not represent a failure of inflation-targeting regimes per se (at least when targets have been set to be achieved over the medium term rather than at a fixed horizon). Instead, the problem appears to be that several central banks failed to operate an inflation-targeting regime in an appropriate manner. After all, several years ago some of us (see, for example, Cecchetti et al. 2000 and Cecchetti, Genberg and Wadhwani 2002) argued that inflation-targeting central bankers should ‘lean against the wind’ in response to asset price bubbles.
- Type
- Chapter
- Information
- Twenty Years of Inflation TargetingLessons Learned and Future Prospects, pp. 440 - 443Publisher: Cambridge University PressPrint publication year: 2010