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Inflation Targeting: Some Extensions

  • Svensson, Lars E.O.

    ()

    (Institute for International Economic Studies, Stockholm University)

Previous analysis of the implementation of inflation targeting is extended to monetary policy responses to different shocks, consequences of model uncertainty, effects of interest rate smoothing and stabilization, a comparison with nominal GDP targeting, and implications of forward-looking behavior. Model uncertainty, output stabilization, and interest rate stabilization or smoothing all call for a more gradual adjustment of the conditional inflation forecast toward the inflation target. The conditional inflation forecast is the natural intermediate target during inflation targeting.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 625.

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Length: 44 pages
Date of creation: 31 Oct 1997
Date of revision:
Handle: RePEc:hhs:iiessp:0625
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Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden

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