needed to generate realistic degrees of persistence in inflation and output-gap variables. A major policy issue is whether it … basic theory. In such circumstances, highly undesirable consequences are likely to ensue if policy responds strongly to the …

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 …

This paper considers a simple quantitative model of output, interest rate and inflation determination in the United … disturbances, can account for our data nearly as well as an unrestricted VAR. The monetary policy rule that most reduces inflation … high average inflation rate. But even in the case of a constrained-optimal policy, that takes into account some of the …

In a discretionary regime the monetary authority can print more money and create more inflation than people expect. But …, although these inflation surprises can have some benefits, they cannot arise systematically in equilibrium when people … inflation shocks ex post, the equilibrium growth rates of money and prices turn out to be higher than otherwise. Therefore …

uncoordinated rules. If governments' present bias is small, coordinated rules are tighter than uncoordinated rules: individual … countries do not internalize the redistributive effect of interest rates. However, if the bias is large, coordinated rules are …

government has time-inconsistent preferences with a present-bias towards public spending. The government chooses a fiscal rule to …

The paper provides an integrated analysis of globalization effects on the inflation-output tradeoff and monetary policy … flatten the Phillips curve, the tradeoff between inflation and activity. Second, the same globalization forces lead the … welfare-based monetary policy to be more aggressive with regard to inflation fluctuations, and at the same time, more benign …

inflation and activity. If policy makers are guided by the welfare criterion of the representative household, globalization … forces also lead monetary policy to be more aggressive with regard to inflation fluctuations but, at the same time, more …

inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after …