Beyond Inflation Targeting
Show Less

Beyond Inflation Targeting

Assessing the Impacts and Policy Alternatives

Edited by Gerald A. Epstein and A. Erinc Yeldan

This book, written by an international team of economists, develops concrete, country specific alternatives to inflation targeting, the dominant policy framework of central bank policy that focuses on keeping inflation in the low single digits to the virtual exclusion of other key goals such as employment creation, poverty reduction and sustainable development.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 6: Inflation and Economic Growth: A Cross-Country Non-Linear Analysis

Robert Pollin and Andong Zhu


Robert Pollin and Andong Zhu1 INTRODUCTION 6.1 This chapter presents new cross-country evidence between 1961 and 2000 on the relationship between inflation and economic growth. Despite the central importance of this inflation-growth relationship for macroeconomic theory and policy, there is nothing close to a professional consensus as to what the empirical evidence tells us about this relationship. The results we present here have direct relevance to the debate on inflation targeting as an appropriate framework for conducting monetary policy. Over the past decade governments throughout the world have embraced inflation targeting as a dominant policy framework. For the most part, this specifically means that they have set a low band of acceptable inflation rates as a primary target in the conduct of economic policy. This band is usually between a 3–5 percent annual inflation rate. They have then maintained sufficiently high short-term interest rates as the intermediate policy instrument for preventing inflation from exceeding that target band. Higher interest rates are aimed, in turn, at reducing economic growth. Slower economic growth should then dampen inflationary pressures. At least in the short run, the costs in terms of slower growth of containing inflation within this 3–5 percent band are evident. But proponents of inflation targeting hold that, over a longer term framework, maintaining low inflation will itself yield benefits for growth that exceed these short-term costs.2 Some limitations of inflation targeting have been widely recognized by mainstream economists and even US central bankers Ben Bernanke and Alan Blinder (see...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.