NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Inflation Targeting: Some Extensions

Lars E. O. Svensson

NBER Working Paper No. 5962 (Also Reprint No. r2250)*
Issued in December 1999
NBER Program(s):   AP    IFM    ME

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.

*Published: Scandinavian Journal of Economics, vol 101, no 3, pp. 337-361, 1999.

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