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July/August 2004, 
Vol. 86, No. 4
Posted 2004-07-01

Is Inflation Targeting Best-Practice Monetary Policy?

by Jon Faust and Dale W. Henderson

The authors systematically analyze whether inflation targeting constitutes “best practice” monetary policy. They note that the inflation targeting perspective is bolstered by the now nearly universally accepted fact that there is no long-run Phillips curve trade-off of the traditional variety. They then distinguish between those who believe there is no exploitable trade-off between inflation and the output gap in the short run—NETers—and those who believe that there is a “limited” exploitable trade-off—LETers.





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