This document contains the text of the 1998 Central Banking Lecture delivered at the London School of Economics and Political Science on June 4th. It starts by asking what factors have been behind the remarkable retreat of inflation that has taken place internationally since the mid-eighties,...

During the 1970s and early 1980s, Spain suffered high rates of inflation but inflation declined and by 1997 inflation had fallen to approximately 2 percent. To fight inflation, Spain implemented austere monetary programs, joined the EMS in 1989, enacted central bank autonomy in 1994, and...

We test the Barro-Gordon model extended to allow for persistence in unemployment. First, we build an index of central bank independence and measures of persistence, and then we compare them with inflation performance in OECD countries. Our results show, as theory predicts, a robust negative...

This paper develops and estimates a game-theoretical model of inflation targeting where the central banker's preferences are asymmetric around the targeted rate. In particular, positive deviations from the target can be weighted more, or less, severely than negative ones in the central banker's...

This paper looks at the long term output effect of those monetary policies aimed at reducing inflation from its peak by late seventies, in nine major OECD countries. The estimated effect depends on the way nominal shocks are identified. Alternatively to the cross-country regression analysis we...

Emerging economies with inflation targets (IT) face a dilemma between fulfilling the theoretical conditions of "strict IT", which imply a fully flexible exchange rate, or applying a "flexible IT", which entails a de facto managed floating exchange rate with FX interventions to moderate exchange...

We study optimal monetary policy from the timeless perspective in a general state-dependent pricing framework. Firms are monopolistic competitors and are subject to idiosyncratic menu cost shocks. We find that, under isoelastic preferences and no government spending, strict price stability is...

The purpose of the present paper is twofold. First, we characterize de Fed's systematic response to technology shocks and its implications for US output, hours and inflation. Second we evaluate the extent to which that responses can be accounted for by a simple monetary policy rule in the...

Recent treatments of the issue of a zero floor on nominal interest rates have been subject to some important methodological limitations. These include the assumption of perfect foresight or the introduction of the zero lower bound as an initial condition or a constraint on the variance of the...

After almost six years with official interest rates at close to zero and with numerous unconventional measures still in place, 2014 is witnessing the beginning of the process of monetary normalisation in those economies, such as the United States and the United Kingdom, in which the recovery...