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Inflation Targeting: Should It Be Modeled as an Instrument Rule or a Targeting Rule?

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  • Lars E.O. Svensson

Abstract

The paper discusses how current inflation targeting should be modeled, and argues that it is better represented as a commitment to a targeting rule (a rule specifying operational objectives for monetary policy or a condition for the target variables), than as a commitment to a simple instrument rule (like a Taylor rule).

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8925.

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Date of creation: May 2002
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Publication status: published as Svensson, Lars E. O. "Inflation Targeting: Should It Be Modeled As An Instrument Rule Or A Targeting Rule?," European Economic Review, 2002, v46(4-5,May), 771-780.
Handle: RePEc:nbr:nberwo:8925

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  1. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
  2. Lars E. O. Svensson, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," NBER Working Papers 5797, National Bureau of Economic Research, Inc.
  3. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, June.
  4. Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
  5. John B. Taylor, 1998. "An Historical Analysis of Monetary Policy Rules," NBER Working Papers 6768, National Bureau of Economic Research, Inc.
  6. John B. Taylor, 1999. "Introduction to "Monetary Policy Rules"," NBER Chapters, in: Monetary Policy Rules, pages 1-14 National Bureau of Economic Research, Inc.
  7. Svensson, Lars E O & Woodford, Michael, 2004. "Implementing Optimal Policy Through Inflation-Forecast Targeting," CEPR Discussion Papers 4229, C.E.P.R. Discussion Papers.
  8. William Poole, 1999. "Monetary policy rules?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 3-12.
  9. Michael Woodford, 1999. "Commentary : how should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 277-316.
  10. Amato, Jeffery D. & Gerlach, Stefan, 2002. "Inflation targeting in emerging market and transition economies: Lessons after a decade," European Economic Review, Elsevier, vol. 46(4-5), pages 781-790, May.
  11. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy Rules for Inflation Targeting," NBER Working Papers 6512, National Bureau of Economic Research, Inc.
  12. Dr Don Brash, 2001. "Making monetary policy: a look behind the curtains," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, March.
  13. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  14. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  15. John P. Judd & Glenn D. Rudebusch, 1998. "Taylor's rule and the Fed, 1970-1997," Economic Review, Federal Reserve Bank of San Francisco, pages 3-16.
  16. Lars E. O. Svensson, 2003. "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 426-477, June.
  17. Stephen G. Cecchetti, 1997. "Central Bank Policy Rules: Conceptual Issues and Practical Considerations," NBER Working Papers 6306, National Bureau of Economic Research, Inc.
  18. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  19. Cecchetti, Stephen G, 2000. "Making Monetary Policy: Objectives and Rules," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 43-59, Winter.
  20. Professor Lars E O Svensson, 2001. "Independent review of the operation of monetary policy in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, March.
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