The paper discusses, from a Post-Keynesian perspective, the impacts of an inflation target regime on growth, distribution and stability in an open economy. The model combines a conflicting claims theory of inflation, changes in the rate of capacity utilization and equilibrium in the external sector to show that in the long run monetary policy has a real impact on growth and employment - there exists a trade-off between the inflation rate and the growth rate. A monetary rule that takes into consideration equilibrium in current account is analyzed. It is shown that this rule can contribute to stability in the long run, to the extent that it hinders the possibility of explosive growth in the stock of external debt.
Inflation targets; Monetary policy; Open economy; Post-Keynesian economics; Conflicting claims