Some Lessons from Six Years of Practical Inflation Targeting

Lars Svensson

No 9756, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: My lessons from six years of practical policy-making include (1) being clear about and not deviating from the mandate of flexible inflation targeting (price stability and the highest sustainable employment), including keeping average inflation over a longer period on target; (2) not adding household debt as a new (intermediate) target variable, in addition to inflation and unemployment ? not ?leaning against the wind,? which is counterproductive, but leaving any problems with household debt to financial policy; (3) using a two-step algorithm to implement ?forecast targeting?; (4) using four-panel graphs to evaluate monetary policy ex ante (in real time) and ex post (after the fact); (5) taking a credible inflation target and a resulting downward-sloping Phillips curve into account by keeping average inflation over a longer period on target; and (6) not confusing monetary and financial policy but using monetary policy to achieve the monetary-policy objectives and financial policy to maintain financial stability, with each policy taking into account the conduct of the other.

Keywords: Financial stabiilty; Household debt; Inflation targeting; Monetary policy (search for similar items in EconPapers)
JEL-codes: E42 E43 E44 E47 E52 E58 (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (30)

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