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Describe the Strategy of Inflation Targeting

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Essay

Describe the strategy of inflation targeting.Why have many countries begun to use this strategy instead of targeting money growth? What are the advantages and disadvantages of inflation targeting?


Definitions:

Festinger and Carlsmith

Psychologists known for their 1959 cognitive dissonance experiment which demonstrated how attitudes can change to align with behavior.

Cognitive Dissonance

A psychological concept indicating the state of having inconsistent thoughts, beliefs, or attitudes, especially as relating to behavioral decisions and attitude change.

Fundamental Attribution Error

The tendency to overestimate personality-based explanations for others' behavior while underestimating situational explanations.

Dispositional Cause

Cause of behavior attributed to internal factors such as personality or character.

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