When I was invited to discuss Chris Sims ’ contribution to the Inflation Targeting Conference, one of the reasons I looked very much forward to preparing the discussion–besides the fact that a Sims paper is typically a very rewarding read–was that I hoped to finally learn what exactly inflation targeting is and what exactly an inflation targeting central bank is supposed to do. However, I soon realized that this would not happen. I have come to the conclusion that inflation targeting is a nebulous monetary policy prescription. This concept is not as clearly defined as I had hoped for and it certainly cannot easily be tied to very precise instructions for the central bank on how to behave. Chris Sims, though, I should note, is more willing to come forward with a definition of inflation targeting than others that write on the topic. His definition of inflation targeting is ‘simply any commitment by the central bank to control the time path of the inflation rate or the price level, at least in the long run. ’ In my opinion, this definition could be one of any monetary policy rather than that of inflation targeting in particular. This is because undoubtedly, any central bank strives to control the time path of inflation or the price level. With this in mind, one then can interpret the limits of inflation targeting that are presented in the Sims paper as limits tha
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