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 …

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 …Previous analysis of the implementation of inflation targeting is extended to monetary policy responses to different …

heterogeneous inflation expectations. Expectations are updated through social dynamics and, with heterogeneity, not all firms choose … to operate, putting downward pressure on realized inflation. Our model rationalizes why countries stuck at the zero lower … bound have had a hard time increasing inflation without being aggressive. The same model also predicts that announcing an …

inflation (with base drift in the price level) and price-level stability (without such base drift) are compared, and a suitable … loss function (corresponding to flexible inflation targeting) is discussed, including the index and level for the inflation …) "forecast targeting," and (3) monetary targeting. Both (1) and (3) are found to be inferior to forecast targeting in maintaining …

This paper considers the problem of optimal long run monetary policy. It shows that optimal inflation policy involves … trading off two quite different considerations. First, increases in the rate of inflation tax the holding of many balances … of inflation raise capital intensity. As long as the economy has a capital stock short of the golden rule level …

Observed inflation targets around the industrial world are concentrated at two percent per year. This chapter … investigates the extent to which the observed magnitudes of inflation targets are consistent with the optimal rate of inflation … inflation ranges from minus the real rate of interest to numbers insignificantly above zero. Furthermore, we argue that the zero …

cause them to overreact to the signals from the central bank, leading the economy to be too sensitive to common forecast …. Specifically, we estimate a series of simple models to measure the impact of inflation targeting on the dispersion of private … sector forecasts of inflation. Using a panel data set that includes 15 countries over 20 years we find no convincing evidence …

approximating strict inflation-forecast targeting are likely to have undesirable properties. We also show that economies with more …Proposals for 'inflation targeting' as a strategy for monetary policy leave open the important operational question of … how to determine whether current policies are consistent with the long-run inflation target. An interesting possibility is …

implementation of monetary policy that gives a major role to an inflation forecast and has been called forecast targeting, and a high …-market economies. The chapter discusses the history, macroeconomic effects, theory, practice, and future of inflation targeting …Inflation targeting is a monetary-policy strategy that is characterized by an announced numerical inflation target, an …

In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating … stabilize price movements in the flexible price sector. Also, in the presence of financial frictions, stabilizing core inflation … frictions a welfare-maximizing central bank should adopt flexible headline inflation targeting--a target based on headline …