Series: IMF Working Papers
Author(s): Rahul Anand , Eswar Prasad , and Boyang Zhang
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 23 September 2015
Keywords: monetary policy framework, core inflation, headline inflation, financial frictions, inflation, economies, welfare, Monetary Policy (Targets, Instruments, and Effects),
In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of d...