To evaluate whether transparency is beneficial, it is usual to assume that the central bank may choose one of two options, opacity versus truthful communication. However, the monetary policymaker may have incentives to misrepresent private information so as to reduce economic volatility by...

In this paper we explore the price setting behavior of Colombian producers and importersusing a unique database containing the monthly price reports underlying the ColombianPPI from Jun-1999 to Oct-2006. We focus on five particular questions: 1. Are pricessticky or flexible? 2. Is a price...

Using a stylized model in which output is measured with error, we derive the optimal policy response to the demand shock signal and to changes in the measurement error volatility from two different perspectives: the minimization of the expected loss (from which we derive the ‘standard’...

Using a three-equation New Keynesian model we find that incorporating an escape clause (EC) into Forward Guidance (FG) is welfare improving as it allows the monetary authority to avoid cases in which the cost of reduced flexibility is too high. The EC provides the central bank with another...

This manuscript can be divided into two main parts. The first one, using a simple example by Minford (2004) and Hatcher (2011), gives the reader a basic introduction to understand the comparison between two monetary-policy regimes: Inflation Targeting (IT) and Price-Level Targeting (PLT). The...

This paper analyses the effects of sterilised, intraday foreign exchange market operations (non-discretionary and discretionary) on foreign exchange returns and volatility in four inflation targeting economies in Latin America. The distribution of exchange rates during intervention and...

In order to asses the credibility of their targets and policies, in-°ation targeting central banks always keep an eye on market expectations ofthe future in°ation rates and short maturity interest rates. In economies withdeveloped ¯nancial markets the prices of ¯nancial assets are a prime...