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Inflation Targeting: Some Extensions

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  • Lars E. O. Svensson

Abstract

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.

Suggested Citation

  • Lars E. O. Svensson, 1997. "Inflation Targeting: Some Extensions," NBER Working Papers 5962, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5962
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    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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