Nearly a quarter-century after Paul Volcker's declaration of war on inflation on October 6, 1979, Alan Greenspan declared that the goal had been achieved. Drawing on the extensive historical record, I examine the views of Chairmen Volcker and Greenspan on some aspects of the evolving monetary...

A central tenet of inflation targeting is that establishing and maintaining well-anchored inflation expectations are essential. In this paper, we reexamine the role of key elements of the inflation targeting framework towards this end, in the context of an economy where economic agents have an...

Taylor rules are simple monetary policy rules that prescribe how a central bank should adjust its interest rate policy instrument in a systematic manner in response to developments in inflation and macroeconomic activity. This paper reviews the development and characteristics of Taylor rules in...

We exploit data on historical revisions to real-time estimates of the output gap to examine the implications of measurement error for the design of monetary policy, using the Federal Reserve's model of the U.S. economy, FRB/US. Measurement error brings about a substantial deterioration in...

This paper investigates the implications of noisy information regarding the measurement of economic activity for the evaluation of monetary policy. A common implicit assumption in such evaluations is that policymakers observe the current state of the economy promptly and accurately and can...

This paper investigates the desirability of adopting a rule in favor of discretionary monetary policy in a model exhibiting Kydland and Prescott's dynamic inconsistency problem. We deviate from earlier work by adopting assumptions regarding policymaker preferences and inflation dynamics that are...

This paper investigates the role of imperfect knowledge regarding the structure of the economy on the formation of expectations, macroeconomic dynamics, and the efficient formulation of monetary policy. Economic agents rely on an adaptive learning technology to form expectations and continuously...

This paper employs stochastic simulations of a small structural rational expectations model to investigate the consequences of the zero bound constraint on nominal interest rates. We find that if the economy is subject to stochastic shocks similar in magnitude to those experienced in the U.S....

This study examines the usefulness of the Taylor-rule framework as an organizing device for describing the policy debate and evolution of monetary policy in the United States. Monetary policy during the 1920s and since the 1951 Treasury-Federal Reserve Accord can be broadly interpreted in terms...