| Summary: | 碩士 === 國立政治大學 === 經濟學系 === 106 === Up till now, price stability has still been treated as the first priority by the monetary authorities. Based on a closed-economy macro model, this thesis uses a graphical analysis to examine whether the implementation of the price target zone tends to stabilize or destabilize the relevant macroeconomic variables when the economy faces policy uncertainty. We also examine the stabilizing performance of the relevant factors of the price target zone. Several main findings emerge from the analysis. First, the price target zone tends to affect the public’s inflation expectations. Second, when the economy experiences an aggregate supply shock, the price target zone leads to a honeymoon effect in prices, but causes a divorce effect in output. Third, when the uncertainty of policy implementation is brought into the picture, the above two effects will be weakened. More specifically, when the uncertainty regarding the realignment of the band is present, the price target zone may lead to a divorce effect in price and a honeymoon effect in output. Moreover, following a rise in the public's sensitivity to policy, the width of a band, and the size of a realignment, the honeymoon effect in price and the divorce effect in output will decline in response.
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