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NBER WORKING PAPER SERIES INFLATION TARGETING AND FINANCIAL STABILITY Michael Woodford Working Paper 17967 /papers/w17967 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 April 2012 Revised text of a talk given as a keynote address at a conference, The Future of Central Banking, at the Einaudi Institute for Economics and Finance, Rome, September 30, 2010. I would like to thank Jean Boivin, Steve Cecchetti, Vasco Curdia, Stefan Ingves, Jean-Pierre Landau, Florencio Lopez-de-Silanes, Rick Mishkin, Benoit Mojon, and Lars Svensson for helpful discussions, and Claes Berg for editorial comments on an earlier draft. This research was supported by the National Science Foundation. The author is also a consultant for the Federal Reserve Bank of New York, on research questions that can include general issues of monetary policy strategy. The opinions expressed here are however those of the author alone, and do not represent the views of the Federal Reserve Bank of New York or the Federal Reserve System. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2012 by Michael Woodford. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Inflation Targeting and Financial Stability Michael Woodford NBER Working Paper