Inflation Targeting and Optimal Monetary Policy

From page 15-- 'Here I survey some of the most important conclusions of this literature. I shall begin by reviewing some of the respects in which inflation targeting as currently implemented represents a step toward what the theory of optimal monetary policy would recommend. In the final section of the paper, I then summarize some of the more important respects in which an optimal policy regime would go beyond current practice. Finally, as a concrete illustration of some of the general remarks that have been made about the form of an optimal policy rule, in an appendix I briefly discuss the quantitative character of optimal policy in the context of the small econometric model for the United States presented in Giannoni and Woodford (forthcoming).