Inflation Fighters Need To Define Their Target
Listener: 4 March 1995
Keywords: Macroeconomics & Money;
The debate about whether inflation is the appropriate target of monetary policy is bedeviled by there being no rigorous definition of inflation. When most prices are increasing at 20 percent a year, there is no trouble at saying that there is inflation. But when some prices are increasing at 2 percent, some at 4 percent, and some are declining, the issue of whether the economy is inflating is much more equivocal. A price change index can be defined to be the rate of inflation for practical purposes, but that is not the same thing as a rigorous definition. If one practical purpose differs from another, the index becomes less relevant.
