Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets
Lars E. O. Svensson
Sveriges Riksbank; Stockholm University - Institute for International Economic Studies (IIES); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
NBER Working Paper No. 5797
Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an explicit intermediate target. Inflation forecast targeting simplifies both implementation and monitoring of monetary policy. The weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target. Money growth or exchange rate targeting is generally inferior to inflation targeting and leads to higher inflation variability. Commitment to "target rules" may be more effective than commitment to "instrument rules."
Number of Pages in PDF File: 38
JEL Classification: E52, E58working papers series
Date posted: January 20, 1997
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