Too-low inflation targets detrimental to economy, higher targets improve unemployment.
Central Banks need to choose the right level of inflation to target. A study using a simplified model of the economy shows that different inflation targets can lead to various outcomes, like high inflation with high output or low inflation with low output. Having too low of an inflation target can be bad for the economy, causing persistent low inflation and other issues. Higher inflation targets can help reduce unemployment and negative interest rate situations. This study's results differ from those of a standard economic model.