We analyze the performance and robustness of some common simple rules for monetary policy in a New-Keynesian open economy model under different assumptions about the exchange rate model. Adding the exchange rate to an optimized Taylor rule gives only small improvements in terms of economic...

According to recent literature on monetary policy, there are two different interpretations of inflation targeting; (1) an instrument rule that responds to a measure of inflation (forecast) deviations from target and (2) a discretionary optimizing strategy towards minimizing the inflation...

We estimate the interdependence between US monetary policy and the S&P 500 using structural VAR methodology. A solution is proposed to the simultaneity problem of identifying monetary and stock price shocks by using a combination of short-run and long-run restrictions that maintains the...

The paper considers alternative monetary policy regimes within a calibrated macroeconomic model with a traded and a non-traded sector. Two classes of regimes are considered; inflation targeting and exchange rate targeting. When the target variable is completely stabilized, both rules have poor...

The paper shows that the procedure of inflation forecast targeting arguably implemented by Sveriges Riksbank and the Bank of England may lead to high nominal and real variability; the latter being manifested most notably in the traded sector. A long inflation forecast targeting horizon results...

The paper analyses alternative monetary policy regimes within a simple, estimated macroeconomic model with a traded and a non-traded sector. Two general classes of regimes are considered, inflation targeting and exchange rate targeting, where the latter also includes monetary union. By analysing...

This paper studies the strategic interaction between the fiscal and monetary authorities when the monetary policymaker pursues an underlying inflation target. Given that monetary policy is transparent and the fiscal policymaker can commit to a particular policy stance, the Stackelberg...

This paper examines the performance of inflation forecast feedback rules in a two-sector, calibrated model of the U.K. economy. Under such rules, the interest rate responds to the deviation of the unchanged-interest-rate forecast of inflation from the inflation target. We find that this...

We analyze the performance and robustness of some common simple rules for monetary policy in a New-Keynesian open economy model under different assumptions about the exchange rate model. Adding the exchange rate to an optimized Taylor rule gives only small improvements in terms of economic...