Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209776 
Authors: 
Year of Publication: 
2000
Series/Report no.: 
Arbeidsnotat No. 2000/2
Publisher: 
Norges Bank, Oslo
Abstract: 
The paper shows that the procedure of inflation forecast targeting arguably implemented by Sveriges Riksbank and the Bank of England may lead to high nominal and real variability; the latter being manifested most notably in the traded sector. A long inflation forecast targeting horizon results in extensive smoothing of interest rate movements. This implies only weak nominal interest rate responses to disequilibrium conditions, causing the real interest rate and hence the real exchange rate to fluctuate persistently. The paper offers an explanation for the recent large variability of Swedish inflation and UK manufacturing sector output.
Subjects: 
inflation targeting
forecast targeting
monetary policy
small open economy
JEL: 
E52
E47
E43
Persistent Identifier of the first edition: 
ISBN: 
82-7553-158-6
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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