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Applied Sciences OPEN ACCESS

What Kind Of Inflation Targeting Is Considered The Most Accepted In The Eu Economies?

Javohir Juraev
Independent Researcher (PhD) Of The Academy Of Public Administration Under The President Of The Republic Of Uzbekistan, Head Of The Department For The Implementation Of Information Systems In Jsc “Uzbekneftegaz”, Uzbekistan
DOI Crossref DOI 10.37547/tajabe/Volume03Issue01-29
tajas 2021
VOL. 3 / NO. 01 JANUARY
FULL TEXT PP. 201-210
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VOLUME 3
ISSUE 01
YEAR 2021
PAGES 201-210
RESEARCH OVERVIEW

Abstract

This study aims to identify the optimal inflation target for the European Central Bank (ECB). It will
argue that the current definition of price stability and thus, the target of 2% yearly increase in HICP is
not relevant according to our macroeconomic projection in Eurozone. This study argues that very low
inflation rates for the last years may signify a threat of deflation. Specifically, the study argues for
asymmetric inflation targeting and recommend the ECB to reformulate its inflation target as “close to
2.5% from below and above”. This has to be done in order to counter possible deflation, lower
unemployment, avoid the liquidity trap, and give more room for the ECB to conduct its
macroeconomic policy under the threat of recession. It is also briefly illuminated some other benefits
of higher inflation, such as the option of negative interest rates, seigniorage and money illusion, and
the corresponding of the costs associated with higher inflation of 2.5%, such as shoe leather costs,
menu costs, tax distortions and uncertainty due to price variability. It is assumed that the outcome of
Cost-Benefit analysis for a 2.5% inflation target is not very different from that for a 2% level, while a
greater increase in inflation target would produce unclear results

RESEARCH TOPICS

Keywords

Inflation targeting central banks, , optimal inflation rate

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