@article{Sussman:297274,
      recid = {297274},
      author = {Sussman, Nathan and Spivak, Avia},
      title = {Inflation targeting as the new golden standard},
      publisher = {Centre for Economic Policy Research},
      address = {London. 2008},
      number = {BOOK},
      series = {Discussion paper series ; no. 7001},
      pages = {37 p.},
      year = {2008},
      abstract = {Financial globalization has seen the emergence of a new  monetary standard based on inflation targeting. At the same  time the most financially advanced economies moved away  from exchange rate targeting which also characterized the  previous era of globalization - the era of the Classical  Gold Standard. Does the new financial environment of free  capital flows constrain the independence of central banks  to conduct monetary policy? We argue, and show empirically,  that credible inflation targeting allows central banks to  conduct an independent monetary policy as manifested in  their ability to deviate from the world (Fed) interest  rate. This new regime, with exchange rate flexibility,  generates sufficient short term volatility that prevents  short term arbitrage against central banks that deviate  from the Fed rate. In contrast, during the Gold Standard  only limited deviation was possible within the 'gold  points'. On the other hand, the credibility of inflation  targeting regime is as good as gold in anchoring inflation  expectations for the long run as manifested in strong  co-movement and similar levels of long term borrowing  rates- just as was the case during the gold standard. We  conclude that inflation targeting allows more flexibility  than the Gold Standard to conduct monetary policy in the  short run and has similar benefits for long term stability.  We suggest that it is the new golden rule.},
      url = {http://repository.graduateinstitute.ch/record/297274},
}