Discuss and evaluate the ethical, economic, demographic, social and technological forces reshaping financial institutions, financial markets and the financial system.
What is inflation targeting? What are the advantages and disadvantages of inflation targeting? Compare and contrast the inflation targeting in the United Kingdom, Canada, and New Zealand.
Explanation & Answer
Attached. Please let me know if you have any questions or need revisions.
Running Head: INFLATION TARGETING
Inflation is a bad thing that discourages investors, interferes with pricing, and finally
discourages savings and enhances capital flight. Therefore inflation targeting is a policy by the
central bank that deals with controlling the monetary policy to accomplish an annual inflation rate.
It applies the principle that long-term economic growth is achievable by price stability. However,
price stability is maintained by controlling inflation (Ardakani et al.,2018). The inflation targeting
can be compared with other policy objectives and goals, including the exchange rates, among
Notably, inflation targeting needs two factors. One of the factors is the central bank's ability
to conduct monetary policies with the highest order of I dependence. There is no central bank that
can work without the government's influence; however, it should have the freedom to choose the
instruments. Secondly is the monetary authorities' willingness and ability to avoid targeting other
financial indicators, including wage rates (Ardakani et al.,2018). The above mentioned two factors
are key in the performance of the inflation targeting.
Advantages of the inflation targeting
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