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Topic: Price stability


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In the News (Tue 18 Jun 19)

  
  Oesterreichische Nationalbank – The Eurosystem’s Definition of Price Stability
To specify the price stability objective, the Governing Council of the ECB announced the following quantitative definition in 1998: “Price stability shall be defined as a year-on-year increase in the HICP for the euro area of below but close to 2%.
Deviations of price developments from the definition of price stability can be identified, and the Eurosystem would then be required to provide an explanation for such deviations and to explain how it intends to reestablish price stability within an acceptable period of time.
Accordingly, price stability is assessed on the basis of price developments in the euro area viewed as a whole, indicating that decisions regarding the single monetary policy aim at achieving price stability in the euro area as a whole.
www.oenb.at /en/geldp_volksw/geldpolitik/ziele/definition/the_eurosystems_definition_of_price_stability.jsp   (1218 words)

  
 BCG Publications
Price and market share are stable only when prices are declining in parallel to costs and prices are low enough to prevent gain in share by high cost competitors.
Price stability is determined by the willingness of the leader and low cost competitor to set prices that are low enough to inhibit growth faster than the market by any competitor.
Price stability is maintained by the low cost competitor maintaining prices parallel to his costs.Any other policies will destabilize prices and shift market share.
www.bcg.com /publications/publication_view.jsp?pubID=718&language=English   (976 words)

  
 Federal Reserve Policy, Inflation, & Inflation Targeting
The study, Price Stability and Inflation Targets: A Legislative History, examines the history of Congressional efforts to mandate price stability in monetary policy, culminating in the development of the first inflation targeting legislation, which was introduced by Saxton in 1997.
Finally, certain market price indicators appear to be especially well-suited to serve as policy guides in such a price stabilizing monetary policy strategy.
Price stabilizing monetary policy not only retains a good deal of flexibility so that other policy goals are achievable, but this policy itself works to stabilize economic activity.
www.house.gov /jec/fed.htm   (2327 words)

  
 The dangerous myth of price stability
For instance, it was observed that the prices of tomatoes increased relatively to potatoes.
Hence the policy of price stability must aim at a certain level of inflation which will give the central bank the flexibility to keep the economy moving along the growth path of economic prosperity and prevent it from ever falling into a deflationary fl hole.
The policy of price stability is therefore a policy of stabilising an arbitrary price index, which supposedly represents the price level.
www.brookesnews.com /060901pricestability.html   (2406 words)

  
 ECB: Benefits of price stability
The objective of price stability refers to the general level of prices in the economy.
While the Treaty clearly establishes the maintenance of price stability as the primary objective of the ECB, it does not give a precise definition of what is meant by price stability.
Price stability is to be maintained over the medium term".
www.ecb.int /mopo/intro/html/benefits.en.html   (265 words)

  
 BAI Online | Banking Strategies | March/April 2003 | Price Stability's Hidden Risk
It has been 50 years since the last great era of price stability, and although the dynamics of the 1950s aren't strictly applicable to today, they do suggest that sustained flat prices are correlated with lower banking profitability, as reflected in net interest margins and returns on equity and assets.
Whether we actually enter a sustained period of price stability remains to be seen, however, and there would be a lag before that perception became embodied in the structure of interest rates.
To be sure, a hypothetical new era of price stability would differ in many ways from the price stability of the 1950s.
www.bai.org /bankingstrategies/2003-mar-apr/price   (1543 words)

  
 Market integration for price stability -DAWN - Business; September 04, 2006
Fixation of prices must be undertaken on the basis of corresponding export parity prices rather than seeking guidance from discretion and cost of production studies which remains the common practice in Pakistan over the years.
Since parity prices tend to be higher than procurement prices, favourable incentive efforts of the recommended policy on investment, production, trade, employment and income distribution would become obvious and ultimately help as an instrument for increasing farm income and reducing (rural) poverty.
However, as parity prices are likely to vary directly with highly volatile world prices, the stability of agricultural commodity prices at home can be ensured if they are determined by the trend lines of past parity prices.
www.dawn.com /2006/09/04/ebr5.htm   (1045 words)

  
 ECB: The ECB's monetary policy strategy and the quantitative definition of price stability
Starting with the first issue, the difference between a quantitative definition of price stability and an inflation target is that the latter does not necessarily define "price stability", but quantifies the objective with respect to price developments that monetary policy is aiming for.
In fact, historically, there have been many instances when inflation targets were set at levels significantly away from "price stability", often in cases where countries starting from high levels of inflation set a path of inflation targets over time in order to bring inflation down to lower levels.
This acknowledges, inter alia, the existence of short-term volatility in prices, resulting from non-monetary shocks to the price level that cannot be controlled by monetary policy.
www.ecb.int /press/key/date/2001/html/sp011217.en.html   (1987 words)

  
 Bank of Finland - Monetary policy
The main objective of Eurosystem monetary policy is to maintain price stability in the euro area, thereby safeguarding the purchasing power of households.
Price stability is defined as a year-to-year increase in consumer prices of below 2%, and price stability is to be maintained over the medium term.
Monetary decisions are based on the Council’s judgement at any one time of the risks to price stability in the euro area.
www.bof.fi /en/rahapolitiikka   (316 words)

  
 Bernanke Makes Price Stability His Top Priority - February 27, 2006 - The New York Sun
Bernanke argued that stable prices and maximum employment are complementary goals, which together lead to moderate interest rates.
Since that time monetary policy makers have committed to price stability, admitting its role in preserving the purchasing power of the dollar and the consequent integrity of tax and accounting rules.
The Fed has also come to recognize the importance of price stability to long-term growth; only in a low-inflation environment can longterm investments be made with any degree of confidence.
www.nysun.com /article/28226   (798 words)

  
 FRB: Speech, Gramlich--Maintaining price stability--October 1, 2003
Price stability is widely understood to be a feasible objective and to be sustainable with little long-run cost in terms of output and unemployment.
One is therefore tempted to conclude that the general understanding of the inflation process and a firm determination to achieve price stability, more than the inflation-targeting regime itself, has been the key element in reducing inflation.
My reading of the empirical evidence is that the key ingredient in keeping inflation low and stable is that the central bank be firmly determined to achieve and maintain stable prices in the long run.
www.federalreserve.gov /boarddocs/speeches/2003/20031001/default.htm   (3499 words)

  
 On Price Stability
Price stability is important for the stability of national life and is an indispensable prerequisite to ensure sustainable development of the economy.
Price stability, a situation neither inflationary nor deflationary, can be conceptually defined as an environment where economic agents including households and firms can make decisions regarding such economic activity as consumption and investment without being concerned about the fluctuation of the general price level.
In view of the current development of prices in Japan, it is difficult to set specific numerical values to the definition of price stability that are consistent with the sound development of the economy.
www.boj.or.jp /en/type/release/zuiji/kako02/k001013a.htm   (1164 words)

  
 InfoDense - Web - Price Stability
Efforts to attain complete price stability can also lead to deflation, which is...
The maintenance of price stability is one of the two core objectives of the Central...
Price stability allows that invention to work with minimal friction.
www.infodense.com /topic?i=Price%20Stability   (234 words)

  
 CENTRAL BANKING: THE CHALLENGES AHEAD Maintaining Price Stability - Finance & Development - December 1996
The understanding of the centrality of price stability has evolved over the years, and it is worthwhile to review selectively recent developments in thinking about this aspect of the role of the central bank, with an emphasis on unsettled and controversial issues.
The approach taken in the statutes of the new European Central Bank is to specify preservation of the value of the currency as the primary goal of the central bank, with the promotion of full employment and growth being permitted to the extent that this does not conflict with the goal of price stability.
If the target is the price level, or a path for the price level, the central bank does have to attempt to compensate for missing the target in previous years.
www.worldbank.org /fandd/english/1296/articles/0101296.htm   (3626 words)

  
 The Bank - Mission: Price Stability   (Site not responding. Last check: )
The pursuance of price stability is the mission of the European System of Central Banks (ESCB), of which the Banco de Portugal is an integral part.
Secondly, because price stability is a premise and not an alternative to growth.
The pursuance of the price stability mission occurs within a framework marked by an important autonomy of the ESCB in general and of the Banco de Portugal in particular when deciding and implementing monetary policy.
www.bportugal.pt /bank/pricestab/pricestab_e.htm   (510 words)

  
 The Myth of Price Stability
Price stability is a misleading and an inherently contradictory concept.
Price indexes necessarily average out the extremes; they are unable to signal the more subtle price movements and they leave out relevant items such as asset prices.
This way, it is not only the general public that is being deceived, the central banks themselves are falling victim to their calculations like the joke of the statistician who drowns while crossing the water that he had thought was easy to wade based on the arithmetic average of its depth.
www.mises.org /freemarket_detail.asp?control=516&sortorder=articledate   (1088 words)

  
 * Price stability - (Business): Definition
PRICE STABILITY: The condition in which the average price level in the economy does not change or changes very slowly.
Definition: Price stability is where prices change by a small and consistent amount.
One of the 3 core purposes of the Bank of England is to maintain price stability.
en.mimi.hu /business/price_stability.html   (224 words)

  
 Full Employment and Price Stability
Price stability under an ELR policy is similar to that under an incomes policy.
Nor does it imply that the resulting price instability due, for example, to an increase in the general level of education, is undesirable.
The Dow equity index price did not recover to its 1929 highs until 1958, the 1927 highs were not reached until 1946, and the low of 1930 was not surpassed until 1936.
www.gate.net /~mosler/essay1.htm   (7720 words)

  
 Price stability: Is a tough central bank enough? | Government from AllBusiness.com
Instead, the fiscal theory view asserts that the price level is sometimes determined in much the same way as the price of Microsoft stocks.5 This alternative view has dramatic implications for achieving price stability.
The key distinction is that under that view, the price level (and thus the value of real debt) is determined elsewhere, so future surpluses must be adjusted with changes in the price level to ensure fiscal solvency.
They differ in their analyses of whether a tough central bank alone is sufficient to achieve price stability, as in the conventional wisdom, or whether an appropriate fiscal policy is also necessary, as in the fiscal theory view.
www.allbusiness.com /government/943323-1.html   (3262 words)

  
 Sveriges Riksbank/Riksbanken - Price stability
Inflation is a rise in the general level of prices in an economy.
The rate of price increases can also change as a result of changed supply conditions, such as when vegetable prices vary according to weather conditions.
The prices of the different goods and services are weighted together on the basis of their representative proportions of consumption.
www.riksbank.com /templates/Page.aspx?id=10543   (320 words)

  
 Inflation and Price Stability - Fact Sheets - The Bank in Brief - Publications and Research - Bank of Canada
INFLATION IS A PERSISTENT RISE over time in the average price of goods and services—in the "cost of living." Inflation and the risk of inflation encourage certain types of spending and investment decisions.
The inflation rate is expressed as a percentage increase in average prices over a year.
Prices tend to go up when demand from consumers exceeds the normal capacity of producers to supply goods and services.
www.bank-banque-canada.ca /en/backgrounders/bg-i1.html   (484 words)

  
 Federal Reserve Bank of Minneapolis - The Region - Gary H. Stern Column-The Goal of Price Stability (February 1990)   (Site not responding. Last check: )
There is a plethora of evidence indicating that monetary policy significantly influences price performance, implying that, if properly designed and administered, policy can reasonably be expected to achieve price stability in the long run.
In sum, price stability is compatible with the other objectives specified by Congress and is the principal contribution the Federal Reserve can make toward attainment of those objectives and continuing economic prosperity.
Perhaps a more serious concern about dedicating monetary policy so exclusively to achievement of price stability is that, while this objective is embraced in the abstract, many fear that it would impose substantial costs on the economy in practice.
www.minneapolisfed.org /pubs/region/90-02/top9.cfm   (968 words)

  
 Daniel W. Drezner: Comment on What is the utility of price stability?
The price stability tends to lead to overproduction or, failing that, political favorities deciding who's going to fill the quota.
Pretty much all of the agricultural supports in the this country were started for "price stability," and in the long run have led to tremendous overproduction.
The other reason price stability is valued for agricultural commodities is the expectation that technology will drive production costs down over time, other things being equal.
www.danieldrezner.com /mt/KeYaHaMlAs.cgi?entry_id=2943   (608 words)

  
 ECB: Definition of price stability
While the Treaty clearly establishes the primary objective of the ECB, it does not give a precise definition of what is meant by price stability.
The ECB’s definition of price stability makes clear that the focus of its monetary policy is on the euro area as a whole.
Therefore, price stability is assessed on the basis of price developments in the euro area economy.
www.ecb.int /mopo/strategy/pricestab/html/index.en.html   (551 words)

  
 Sveriges Riksbank/Riksbanken - Monetary policy
According to the Sveriges Riksbank Act, the objective of monetary policy is to “maintain price stability”.
The Riksbank has interpreted this objective to mean a low, stable rate of inflation.
More precisely, the Riksbank's objective is to keep inflation around 2 per cent per year, as measured by the annual change in the consumer price index (CPI).
www.riksbank.com /templates/SectionStart.aspx?id=10602   (442 words)

  
 Safe Haven | Greenspan - The Guardian of Price Stability?
On the eve of Fed chairman nominee Ben Bernanke's Senate confirmation hearing, there is the question whether he will be the same kind of guardian of price stability as his predecessor, Alan Greenspan.
Let's look at what Greenspan is handing off in terms of price stability compared to what he inherited.
If we expand our view of price stability to include the prices of houses, Greenspan would be viewed as a sleeping guardian of price stability.
www.safehaven.com /article-4122.htm   (335 words)

  
 General   (Site not responding. Last check: )
Hence, price stability is a necessary precondition for a healthy economy.
The European Central Bank (ECB) is therefore committed to achieving and maintaining price stability.
Price stability offers them security and confidence, both of which contribute to sustainable economic growth.
www.dnb.nl /dnb/home?lang=en&id=tcm:13-80576-64   (328 words)

  
 ECB: Definition of price stability
The ECB’s definition of price stability makes clear that the focus of its monetary policy is on the euro area as a whole.
Therefore, price stability is assessed on the basis of price developments in the euro area economy.
price level declines) is inconsistent with price stability.
www.ecb.de /mopo/strategy/pricestab/html/index.en.html   (535 words)

  
 Bernanke on price stability - Editorials/Op-Ed - The Washington Times, America's Newspaper   (Site not responding. Last check: )
The role of price stability is straightforward: "Because prices constitute a market economy's fundamental means of conveying information, the increased noise associated with high inflation erodes the effectiveness of the market system." Thus, as Mr.
Indeed, during much of the 1960s and 1970s, price stability and high employment were considered by "some influential voices" to be "substitutes, not complements," Mr.
Bernanke persuasively argued, price stability is a prerequisite to the achievement of the Fed's other mandated objectives: high employment and moderate long-term interest rates.
www.washtimes.com /op-ed/20060303-090938-8933r.htm   (450 words)

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