Policy Rules for Inflation Targeting

54 Pages Posted: 20 Sep 2000

See all articles by Glenn D. Rudebusch

Glenn D. Rudebusch

Federal Reserve Bank of San Francisco

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 2 versions of this paper

Date Written: April 1998

Abstract

Policy rules that are consistent with inflation targeting are examined in a small macroeconomic model of the US economy. We compare the properties and outcomes of explicit instrument rules' as well as targeting rules.' The latter, which imply implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that inflation forecasts are central for good policy rules under inflation targeting. Some simple instrument and targeting rules do remarkably well relative to the optimal rule; others, including some that are often used as representing inflation targeting, do less well.

Suggested Citation

Rudebusch, Glenn D. and Svensson, Lars E.O., Policy Rules for Inflation Targeting (April 1998). NBER Working Paper No. w6512. Available at SSRN: https://ssrn.com/abstract=226254

Glenn D. Rudebusch (Contact Author)

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

Lars E.O. Svensson

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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