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

Inflation targeting was introduced in New Zealand in 1990 and has since been adopted by more than 20 countries. This period of only 15 years has seen major progress in practical monetary policy. The practice of inflation targeting has led to a more systematic and consistent internal decision process (Brash 2000; Sims 2002; Svensson 2001a), much more transparent communication with the private sector (Blinder et al. 2001; Fracasso, Genberg, and Wyplosz 2003; Leeper 2003), and an unprecedented degree of accountability. The actual monetary and real stability achieved is exceptional from a historical perspective (King 2002).