INFLATION FORECAST TARGETING - IMPLEMENTING AND MONITORING INFLATION TARGETS

Inflation targeting is shown to imply inflation forecast targeting: th e central bank's inflation forecast becomes an explicit intermediate t arget. Inflation forecast targeting simplifies both implementation and monitoring of monetary policy, The weight on output stabilization det ermines how quickly the inflation forecast is adjusted towards the inf lation target. Money growth or exchange rate targeting is generally in ferior than inflation targeting and leads to higher inflation variabil ity. Commitment to 'target rules' may be better than commitment to 'in strument rules'. (C) 1997 Elsevier Science B.V.