Working Paper: NBER ID: w8925
Authors: Lars E.O. Svensson
Abstract: The paper discusses how current inflation targeting should be modeled, and argues that it is better represented as a commitment to a targeting rule (a rule specifying operational objectives for monetary policy or a condition for the target variables), than as a commitment to a simple instrument rule (like a Taylor rule).
Keywords: No keywords provided
JEL Codes: E42; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inflation targeting (E31) | commitment to a targeting rule (D79) |
| commitment to a targeting rule (D79) | more effective stabilization of inflation and output gaps (E63) |
| inflation forecasts (E31) | monetary policy decisions (E52) |
| monetary policy decisions (E52) | stabilization of inflation and output gaps (E63) |
| transparency and accountability (G38) | effectiveness of inflation targeting (E52) |
| commitment to a targeting rule (D79) | alignment of central bank actions with operational loss function (E52) |
| alignment of central bank actions with operational loss function (E52) | predictability and effectiveness of monetary policy (E52) |