We consider monetary-policy rules with inflation-rate targets and interest-rate or money-growth instruments using a flexible-price, perfect-foresight model. There is always a locally-unique target equilibrium. There may also be below-target equilibria (BTE) with inflation always below target and...

The Federal Reserve (Fed) has maintained a general trend toward increased transparency and gradualism. This paper investigates the implications of these historical developments for the anticipation of monetary policy actions and adjustment of interest rates. In a theoretical framework, we...