Inflation targeting--some theory with main focus on practice

In the 1950s and 1960s, a strong belief evolved that the economy could be controlled and steered in the desired direction. This optimistic view gradually lost favour in the face of developments. Today's monetary policy is based on the experience gained by Norway and other countries, over the past 30 years in particular, and on the results of extensive macroeconomic research. Important lessons are: Inflation is a monetary phenomenon. A country with a national currency can choose the level of its own inflation. Inflation in a country is not something that drifts in with the wind from abroad. If monetary policy is to function effectively, an institutional framework is required to reinforce confidence that overriding weight is assigned to long-term objectives.