DP6252 Pillars of Globalization: A history of monetary policy targets, 1797-1997

Author(s): Marc Flandreau
Publication Date: April 2007
Keyword(s): central banks, exchange rates, inflation, monetary policy targets
JEL(s): B01, E1, E3, E5
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6252

This paper studies the evolution of monetary policy targets over the course of the past 200 years. We argue that policy targets are set as part of an assignment procedure that is intended to address both time consistency and monitoring problems. As a result, central banks, after having been assigned to target the exchange rate in the 19th century, are now entrusted with targeting the rate of inflation. Critical advances in the measurement of inflation have proved decisive in bringing about this radical transformation.