The Instrument-Rate Projection under Inflation Targeting: The Norwegian Example


Lars E.O. Svensson
Princeton University, CEPR, and NBER

First draft: November 2005
This version: August 2006
Stability and Economic Growth: The Role of Central Banks, Banco de Mexico, 2006, 175-198.

The introduction of inflation targeting has led to major progress in practical monetary policy. Recent debate has focused on the interest-rate assumption underlying published projections of inflation and other target variables. This paper discusses the role of alternative interest-rate paths in the monetary-policy decision process and the recent publication by Norges Bank (the central bank of Norway) of optimal interest-rate projections with fan charts.

JEL Classification: E42, E52, E58