Stability price index: peculiarity of modeling in Ukraine

Stability price index: peculiarity of modeling in Ukraine

 

Oleksandr Chernyak, Olena Bazhenova

 

Keywords: Price index; Stability price index; Inflation targeting; Financial crisis; Monetary policy; Modeling of stability price index

 

Summary This paper considers the theoretical and methodological foundations of modeling price index for central banks targeting that is the mean of preventing significant fluctuations in monetary policy which are the reason for many macroeconomic mistakes. In accordance with the model, the transition from the index of consumer prices to the index of stable prices when targeting inflation reduces the variance of output. The choice of the central banks around the world to use the stable prices index for the effective monitoring and targeting of inflation is an important factor in the context of achieving the highest degree of stability in economic activity.

 

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