CNB paper shows power of inflation targeting


A working paper published by the Czech National Bank (CNB) on August 13 demonstrates how inflation targeting can lead to the counterbalancing of debt-financed government spending shocks.

Where non-targeting banks would keep monetary policy constant in response to such shocks, those operating inflation target frameworks tend to stop accommodative policy, and offset the shocks with higher interest rates, the paper says.

Authors, Michal Franta, Jan Libich and Petr Stehlík, demonstrate that there

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