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Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets

  • Svensson, Lars E.O.

    ()

    (Institute for International Economic Studies, Stockholm University)

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 than inflation targeting and leads to higher inflation variability. Commitment to 'target rules' may be better than commitment to 'instrument rules'.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 615.

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Length: 38 pages
Date of creation: 06 Nov 1997
Date of revision:
Handle: RePEc:hhs:iiessp:0615
Contact details of provider: Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/

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