The Inflation Targeting Framework in Norway, Issues 2002-2184
Norway adopted an inflation targeting framework in early 2001, thus concluding its gradual but consistent move toward greater exchange rate flexibility. This paper assesses the institutional and technical design of the framework, as well as its potential implications for the practical implementation of monetary policy against the experience from selected industrial countries that had adopted inflation targeting frameworks prior to Norway. Norway's role as a commodity exporter exposed to large terms of trade shocks, and the possible consequences of newly introduced fiscal guidelines are also discussed.
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Accountability Transparency and Communication with the Public
Monetary Policy Transmission Mechanism
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aggregate demand assessment asset prices Bank's Inflation Forecast bank's objective function Batini bringing inflation back central bank legislation central bank's objective changes in real channel conduct of monetary consumer price index consumer price inflation CPI excludes CPIATE credibility deviations domestic economic exchange rate stability Executive Board fiscal Fixed exchange rate flexible forecast errors forward rate impact implementation of monetary increase inflation expectations inflation outlook inflation rate Inflation Report inflation targeting framework interest rate path International Monetary Fund krone exchange rate lags long-term low and stable macroeconomic Monetary Policy Committee monetary policy meetings monetary transmission Moreover nominal anchor nominal exchange rate Norges Bank Norges Bank's Inflation Norway's Norwegian Krone output gap percentage point range Point target potential provides real exchange rate real taxes relatively RRMSE shock hits short-term small open economies stable inflation Statistics Norway supply shocks Target range transmission mechanism transparency U.S. dollar Volatility Yes Price stability