Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets

38 Pages Posted: 20 Jan 1997

See all articles by Lars E. O. Svensson

Lars E. O. Svensson

Stockholm School of Economics; Stockholm University - Institute for International Economic Studies (IIES); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: October 1996

Abstract

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."

JEL Classification: E52, E58

Suggested Citation

Svensson, Lars E.O., Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets (October 1996). NBER Working Paper No. 5797. Available at SSRN: https://ssrn.com/abstract=1334 or http://dx.doi.org/10.2139/ssrn.1334

Lars E.O. Svensson (Contact Author)

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

HOME PAGE: http://larseosvensson.se

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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