01806cas a2200265 a 4500 AALejournalIMF015524 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513572574 1018-5941 BD-DhAAL BD-DhAAL Anand, Rahul. What Measure of Inflation Should a Developing Country Central Bank Target? / Rahul Anand, Eswar Prasad, Boyang Zhang. Washington, D.C. : International Monetary Fund, 2015. 1 online resource (37 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of developing economies, where a large proportion of households are credit constrained and the share of food expenditures in total consumption expenditures is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting improves welfare outcomes. We also compute the optimal price index, which includes a positive weight on food prices but, unlike headline inflation, assigns zero weight to import prices. Mode of access: Internet Prasad, Eswar. Zhang, Boyang. IMF Working Papers; Working Paper ; No. 2015/205 Full text available on IMF http://elibrary.imf.org/view/journals/001/2015/205/001.2015.issue-205-en.xml IMF e-Library