Inflation Targeting.

• Position: Conferences - National Bureau of Economic Research

An NBER Conference on Inflation Targeting, organized by Michael Woodford of NBER and Princeton University, took place on January 23-25. The conference agenda was:

Mervyn A. King, Bank of England, "What has Inflation Targeting Achieved?"

Lars E. O. Svensson and Michael Woodford, NBER and Princeton University, "Implementing Optimal Policy through Inflation-Forecast Targeting"

Discussant: Bennett T. McCallum, NBER and Carnegie-Mellon University

Laurence M. Ball, NBER and John Hopkins University, and Niamh Sheridan, International Monetary Fund, "Does Inflation Targeting Matter?".

Discussant: Mark Gertler, NBER and New York University

Stephen G. Cecchetti, NBER and Ohio State University, and Junhan Kim, Ohio State University, "Inflation Targeting, Price Level Targeting, and Output Variability"

Discussant: N. Gregory Mankiw, NBER and Harvard University

Marc P. Giannoni, Columbia University, and Michael Woodford, "Optimal Inflation Targeting Rules" Discussant: Edward Nelson, Bank of England

Athanasios Orphanides, Federal Reserve Board, and John C. Williams, Federal Reserve Bank of San Francisco, "Imperfect Knowledge, Inflation Expectations, and Monetary Policy"

Discussants: George W. Evans, University of Oregon

Christopher A. Sims, NBER and Princeton University, "Fiscal Implications of Inflation Targeting"

Discussant: Stephanie Schmitt-Grohe, NBER and Rutgers University

Marvin Goodfriend, Federal Reserve Bank of Richmond, "Inflation Targeting in the United States"

Discussant: Donald Kohn, Federal Reserve Board

Jiri Jonas, International Monetary Fund, and Frederic S. Mishkin, NBER and Columbia University, "Inflation Targeting in Transition Economies"

Discussant: Olivier J. Blanchard, NBER and MIT

Ricardo J. Caballero, NBER and MIT, and Arvind Krishnamurthy, Northwestern University, "Inflation Targeting and Sudden Stops"

Discussant: Ben S. Bernanke, Federal Reserve Board

Panel Discussion: "Is Deflation a Threat for the U.S.?"

Martin Feldstein, NBER and Harvard University, Michael Woodford, and Ben S. Bernanke

King spoke about the experience of inflation targeting in the United Kingdom. Following its exit from the Exchange Rate Mechanism in September 1992, the UK adopted inflation targeting as a means of providing a direct and transparent framework for monetary policy. A key component in the successful implementation of the framework was a willingness to explain how the economy was evolving, particularly in the Bank of England's Inflation Report. In May 1997, the framework was sharpened by making the target symmetric, and by setting up an independent committee at the Bank of England to set monetary policy. The Committee structure has proved invaluable in introducing a range of accountable views into the discussion. Many issues still remain to be resolved. For example, what types of central banks benefit from an inflation targeting framework? And, over what horizon should the central banks bring inflation back to target?

Svensson and Woodford consider the way in which inflation-forecast targeting should be conducted in order to bring about a socially optimal equilibrium, with an optimal long-run average inflation rate and optimal transitory responses to disturbances. They evaluate variant schemes from...