- The difference between the two sorts of AIT that I have in mind is subtle, so pay close attention.
- It hinges not on any different central bank objectives or reaction function parameters or that sort of thing, but on two different reasons why a central bank might find that it has veered from its inflation target in the first place.
- It turns out that the implications of AIT, understood as a means for eventually making up for previous, unwanted price level movements, and consequent changes in the ex-post rate of inflation, differ dramatically depending on which sort of target deviations it's trying to make up for.
For further details see:
2 Sorts Of Average Inflation Targeting