policy analysis. It suggests that the best method of solving the puzzle implies a close connection between theory and …

prices than inflation targeting. -- inflation targeting ; output targeting ; interest rates …

The central bank's optimal reaction to foreign and domestic shocks is analyzed in an inflation targeting model allowing … that the interest rate response to foreign shocks is smaller when pass-through is low. Second, the inflation …-through ; exchange rate volatility ; inflation targeting ; monetary policy ; small open economy …