NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Forecast Targeting as a Monetary Policy Strategy: Policy Rules in Practice

Michael Woodford

NBER Working Paper No. 13716
Issued in December 2007
NBER Program(s):   ME

Forecast targeting is an innovation in central banking that represents an important step toward more rule-based policymaking, even if it is not an attempt to follow a policy rule of any of the types that have received primary attention in the theoretical literature on optimal monetary policy. This paper discusses the extent to which forecast targeting can be considered an example of a policy rule, and the conditions under which it would represent a desirable rule, with a view to suggesting improvements in the approaches currently used by forecast-targeting central banks. Particular attention is given to the intertemporal consistency of forecast-targeting procedures, the assumptions about future policy that should be used in constructing the forecasts used in such procedures, the horizon with which the target criterion should be concerned, the relevance of forecasts other than the inflation forecast, and the degree of robustness of a desirable target criterion for monetary policy to changing circumstances.

download in pdf format
   (359 K)

email paper

This paper is available as PDF (359 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13716

Published: Michael Woodford, 2007. "The Case for Forecast Targeting as a Monetary Policy Strategy," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 3-24, Fall.

Users who downloaded this paper also downloaded these:
Ilut and Schneider w17900 Ambiguous Business Cycles
Uhlig w16416 Economics and Reality
Livshits, MacGee, and Tertilt w17448 Costly Contracts and Consumer Credit
Hall w16741 The Long Slump
Coibion and Gorodnichenko w16537 Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us