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The consensus about the importance of price level stability and the role of monetary policy is a fairly recent development.
We would argue that this choice will enhance macroeconomic stability in the UK with the decline in uncertainty from the removal of a spectrum of exchange rate shocks being aided by an essentially mo re credible, Treaty-based, commitment to price level stability.
Finally, both concluded that the monetary authority bears the ultimate responsibility for monetary and price level stability, a responsibility it discharges by giving some nominal variable under its control a stable, determinate value.
Without a central bank, New Zealand achieved price level stability through the Bank of England's obligation to maintain convertibility: British price level stability directly affected the stability of export earnings and, through the sterling exchange standard, the domestic price level.
Although this framework is relatively clear, its critics have asked what role the output gap might play, and given the ECB's commitment to price level stability in the medium term, a different formulation may be useful.
He criticizes the Fed under Paul Volcker's leadership for passing over a golden opportunity to sustain price level stability, opting instead to produce seigniorage for the federal government.
Thus, the ceiling is different from monetary targeting as practiced by the Bundesbank who announced a target corridor, or more precisely a funnel, for the future money stock that would be in line with price level stability. A lid on inflation also should not be mixed up with inflation targeting in which the central bank bases the conduct of its monetary policy on a publicly announced inflation forecast as the Bank of England does.
Until recently there was a quite widely shared consensus that pursuing price level stability would not be a good idea.