interest, inflation, currency depreciation and inflation differentials. Forward rates are related to these expected future … variables via combinations of term, inflation and foreign exchange risk premia. A unified derivation, discussion and comparison …

inflation (with base drift in the price level) and price-level stability (without such base drift) are compared, and a suitable … loss function (corresponding to flexible inflation targeting) is discussed, including the index and level for the inflation … price stability. The benefits of credibility (private inflation expectations coinciding with the inflation target) are …

inflation, and that the optimal monetary policy is that which maximizes real balances. We also show that the real rate of … interest is not invariant to monetary policy: inflation lowers the real rate …

expectations of the time-paths of future short interest rates, monetary policy, inflation rates and currency depreciation rates …