Some monetary policy strategies work better than targeting a certain level of inflation, a working paper published by the Bank of Italy finds.

In Make-up strategies and exchange rate pass-through in a low-interest-rate environment, Alessandro Cantelmo, Pietro Cova, Alessandro Notarpietro and Massimiliano Pisani examine three strategies. The authors look at two “make-up strategies” – price-level targeting and average inflation targeting – and compare these to inflation targeting.

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