Curiously Joseph Stiglitz does not mention them

Should we abandon the inflation targeting The Nobel Prize in economics Joseph Stiglitz calls for the removal of these monetary policy seeking to achieve a rate of inflation of medium term determined in advance. This claim however is to make consensus.

Before addressing the different criticisms of Stiglitz, remember that this system, with its various variants, helped to keep inflation expectations at a low level in many industrialized countries and developing, thus promoting price stability and growth. These examples demonstrate that inflation targeting can be effective in the fight against the skyrocketing prices, even if it is not exempt from difficulties. Curiously, Joseph Stiglitz does not mention them. It is necessary to implement consistently and on time, given the lags between actions and their effect on the labels. And also taking into account the institutional context (especially the structure of the financial system), the economy of the country concerned and the system of Exchange in effect (flexible exchange are strongly recommended, especially in emerging countries). Finally, one must choose a "realistic" inflation target which can be adjusted over time.

Critics of the American economist rely on much more questionable arguments. Inflation targeting would be simplistic and mechanically applied rule. As noted by many authors and central bankers, this argument is far from the truth of the conduct of monetary policy. In practice, central bankers are in General not a rule with a turnover inflation calculated to the millimetre and frozen single objective, even if it is the main objective. Monetary policy is influenced by several parameters, including inflation and inflation expectations, and the activity economic and other variables. For nothing say permanent arbitrations are makers between different economic values and the estimated risks.

Consider inflation targeting as a mechanical immutable and deterministic such that Stiglitz is therefore far from reality. This does not mean that the criticism is prohibited, including taking into account (or absence of consideration, or not sufficiently taken into account) of certain variables, such as the "benign neglect" in recent years in many countries of the developments of the stock of money, which explains current inflationary slippages yet for a good part, not to deny the role of the prices of the imports which Stiglitz emphasized heavily as it was the only to explain these slippages.

In addition, he rejects inflation targeting on the grounds that it takes into account inflation observed while underlying inflation (excluding energy prices and food prices) which is important. There again, it is forgotten that central bankers are not functioning as pre-programmed computers. They also observe the underlying inflation and the role of prices such as oil and food goods, especially in emerging countries. And then give too great importance to these individuals, as recommended by Stiglitz, if important property prices are for some countries, would be dangerous. First, this strategy camouflage rising prices across, which ultimately is the concern of the consumer and the investor, and their purchasing power. Then he neglects an important phenomenon that monetary policy should not be disregarded: the "second round effects", i.e. the possible impact of the outbreak of all labels on wage claims and therefore, in turn, on inflation. Ignore that the rise in some prices and underlying inflation could therefore lead to a monetary policy too accommodating.

Finally, Stiglitz sets the period of low price increases globalisation rather than monetary policy followed by the States. If we cannot overlook the impact of international competition on price, it see that it is more on relative prices (the value of traded goods between them in areas) on the increase of the set of labels that characterizes the inflation, even if, the time that the adjustments will be, the rate of inflation observed is affected. Empirical studies suggest that monetary policy, fruit of the independence and credibility of central banks, which explains the duration the moderation of labels rather than globalization per se. Longer term, inflation is and remains essentially a monetary phenomenon.