Inflation Targeting: Some Extensions
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.
|Date of creation:||Mar 1997|
|Date of revision:|
|Publication status:||published as Scandinavian Journal of Economics, vol 101, no 3, pp. 337-361, 1999.|
|Note:||AP IFM ME|
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- Balvers, Ronald J & Cosimano, Thomas F, 1994. "Inflation Variability and Gradualist Monetary Policy," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 721-38, October.
- Laurence Ball, 1997.
"Efficient Rules for Monetary Policy,"
NBER Working Papers
5952, National Bureau of Economic Research, Inc.
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- Backus, David & Driffill, John, 1986. "The Consistency of Optimal Policy in Stochastic Rational Expectations Models," CEPR Discussion Papers 124, C.E.P.R. Discussion Papers.
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