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Institute for International Economic Studies, Stockholm University Seminar Papers, Institute for International Economic Studies, Stockholm University

No 615:
Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets

Lars E.O. Svensson ()

Abstract: 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'.

Keywords: Inflation targeting; inflation forecast targeting; intermediate target; (follow links to similar papers)

JEL-Codes: E42; E52; E58; (follow links to similar papers)

38 pages, November 6, 1997

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