New study suggests optimal inflation target to stabilize economy fluctuations.
A new way to manage money policy has been suggested. It involves a simple system with clear goals for the central bank. By using a specific formula and rules, they aim to keep inflation stable and avoid economic problems. The research shows that setting an annual inflation target of around 2% is best, and focusing on inflation is more important than other economic factors. The rules they suggest are similar to a price-level rule, which helps keep the economy stable.