Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets

Lars E. O. Svensson

NBER Working Paper No. 5797 (Also Reprint No. r2157)
Issued in October 1997
NBER Program(s):   IFM   ME

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

(1815 K)

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

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