We examine the performance of forward-looking inflation-forecast-based rules in open economies. In a New Keynesian two … the feedback parameter on inflation if the forecast horizon lies too far into the future. Second, the problem of … central banks respond to expected consumer, rather than pro- ducer price inflation. JEL Classification: E52, E37, E58 …

credibility a pegged exchange rate regime yields a lower loss compared to an inflation targeting policy, even if this policy … for a policy-maker to adopt inflation targeting over a strict exchange rate targeting regime. Full credibility is not a … precondition, but exposure to foreign and financial shocks and high steady state inflation make joining the EMU relatively more …