NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets

Lars E. O. Svensson

NBER Working Paper No. 5797 (Also Reprint No. r2157)
Issued in October 1996
NBER Program(s):International Finance and Macroeconomics, Monetary Economics

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 to inflation targeting and leads to higher inflation variability. Commitment to commitment to

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Document Object Identifier (DOI): 10.3386/w5797

Published: European Economic Review, Vol. 41 (1997): 1111-1146. citation courtesy of

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