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