search query: @indexterm ECONOMIC FORECASTING / total: 665
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| Author: | Leitemo, K. |
| Title: | Targeting inlfation by constant-interest-rate forecasts |
| Journal: | Journal of Money, Credit and Banking
2003 : AUG, VOL. 35:4, p. 609-626 |
| Index terms: | Economic forecasting Inflation Interest rates |
| Freeterms: | Targeting |
| Language: | eng |
| Abstract: | The concept of constant-interest-rate inflation forecast (CIR) targeting is reviewed in this article. The time-inconsistent nature of CIR targeting is stressed and a new method for construction CIR forecasts is provided consistently in the context of models with foreward-looking variables. A dynamic New Keynesian model with foreward-looking price setting is used as an illustration, suggesting that the main reason for choosing a relatively long forecast targeting horizon lies in the monetary authorities' objective to smooth interest rate movements, as greater nominal and real stabilization is achieved at a relatively short inflation forecast targeting horizon. |
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