Part VII. How Successful Has InflationTargeting Been?

[...]This exercise is meant to give a quantitativeimpression of whether the interaction between inflationand short-term interest rates exhibits a pattern of behaviorafter the adoption of the inflation target that differsmarkedly from the pattern before.2 The unconditional forecastof each variable represents the way we would expect thesystem to behave in the absence of shocks from the situationat the time of target adoption. The comparison betweenwhat actually happened to these variables and theirunconditional forecast is reasonable for the early 1990s,given the absence of major supply and demand shocks sinceadoption for the three inflation targeters we examine.[...]