Uncertainty Regarding the Output Gap and the Reaction Function under an Inflation Targeting Regime
By Mario Caballero Rosazza ; José Víctor Gallegos Muñoz
December 2001
Language: Spanish
Abstract
The aim is to determine whether it is advisable for the Central Bank to use an output gap indicator to estimate demand pressures on the price level; the behavior of the Central Bank under an inflation-targeting framework is discussed theoretically; the costs of errors in estimating the output gap are analyzed; and alternative methodologies are discussed.