Inflation Targeting in Canada, New Zealand, Sweden, the United Kingdom, and in General

One major objective of this chapter is to discuss arrangements and experiences in four countries that have recently adopted explicit inflation targets as guides for the conduct of monetary policy. The countries in question are Canada, New Zealand, Sweden, and the United Kingdom, all of which adopted official inflation targets between 1990 and 1993.1 As these countries instituted their inflation targets with substantially different legislative provisions and targeting procedures, their experiences should eventually provide useful information concerning the design of effective central bank arrangements. But too little time has passed to date for such conclusions to be drawn with any confidence, so in the meantime it will be necessary to base tentative evaluations of inflation targeting on theoretical analysis and more generalized historical experiences. The second major objective of this chapter, accordingly, is to provide an analytical discussion of this type of the more important strengths and weaknesses of inflation targeting schemes.