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Working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
21 July 2000
Working Paper no. 119
By Nicoletta Batini and Edward Nelson
In this paper we investigate the problem of selecting an optimal horizon for inflation targeting in the United Kingdom. There are two key ways of thinking about an optimal horizon, so we look at optimal horizons for both of these interpretations. In addition, to see whether our results are robust in the face of model uncertainty, we compute optimal horizons for two different models with divergent structural and dynamic characteristics.