【正文】 duals in charge – Inconsistent with democratic principles Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 167 Inflation Targeting II ? New Zealand (effective in 1990) – Inflation was brought down and remained within the target most of the time. – Growth has generally been high and unemployment has e down significantly ? Canada (1991) – Inflation decreased since then, some costs in term of unemployment ? United Kingdom (1992) – Inflation has been close to its target. – Growth has been strong and unemployment has been decreasing. Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 163 Moary Targeting II ? Japan – In 1978 the Bank of Japan began to announce “forecasts” for M2 + CDs – Bank of Japan’s moary performance was much better than the Fed’s during 19781987. – In 1989 the Bank of Japan switched to a tighter moary policy and was partially blamed for the “l(fā)ost decade” Copyright 169。Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 164 Moary Targeting III ? Germany – The Bundesbank focused on “central bank money” in the early 1970s. – A moary targeting regime can restrain inflation in the longer run, even when targets are missed. – The reason of the relative success despite missing targets relies on clearly stated moary policy objectives and central bank engagement in munication with the public. Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 168 Inflation Targeting III ? Advantages – Does not rely on one variable to achieve target – Easily understood – Reduces potential of falling in timeinconsistency trap – Stresses transparency and accountability ? Disadvantages – Delayed signaling – Too much rigidity – Potential for increased output fluctuations – Low economic growth during disinflation Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 1612 Summary Table 1 Advantages and Disadvantages of Different Moary Policy Strategies Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 1616 Criteria for Choosing the Policy Instrument ? Observability and Measurability ? Controllability ? Predictable effect on Goals Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 1620 Central Bank’s Response to Asset Price Bubbles: Lessons From the Subprime Crisis ? Should central banks respond to bubbles? – Strong argument for not responding to bubbles driven by irrational exuberance – Bubbles are easier to identify when asset prices and credit are increasing rapidly at the same time. – Moary policy should not be used to prick bubbles. Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 1624 Historical Perspective III ? Preemptive strikes against inflation ? Preemptive strikes against economic downturns and financial disruptions – LTCM – Enron – Subprime meltdown ? International policy coordination Copyright 169。 2020 Pearson AddisonWesley. All rights reserved. 1628 ReducedForm ? Examines whether one variable has an effect on another by looking directly at the relationship between the two ? Analyzes the effect of changes in money suppl