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Optimality criteria of hybrid inflation-price level targeting

Bokor, László (2007): Optimality criteria of hybrid inflation-price level targeting.

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Abstract

This paper provides a comprehensive analysis of the relative performance of inflation targeting, price level targeting, and hybrid targeting of them in a simple three-period steady state to steady state economy facing transmission lag, and derives optimal policies implementing commitment solution under all set of hybrid expectations, social preference, and cost-push shock persistence. The main intention of the examination is to reveal the nature of the interrelations between economic and policy parameters.

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