The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of … fiscal theory to interpret historical episodes, including the rise and fall of inflation in the 1970s and 1980s, the long … pegs, the ends of hyperinflations, currency crashes, and the success of inflation targets. Going forward, fiscal theory …

utility households, which is a new source of inflationary bias. With commitment, i) zero inflation is the optimal long …-run policy, ii) time-consistent policy requires both inflation and distributional penalties, and iii) the planner trades off …

inflation expectations. We develop this measure using assumptions common in economic analysis of open economies. Using quarterly …

A parsimonious model of shifting policy regimes can simultaneously capture expected and actual US inflation during 1969 …. Private sector learning about policymaker type leads to a reputation state variable. We use model inflation forecasting rules … to extract state variables from SPF inflation forecasts. US inflation is tracked by optimal policy without commitment …

. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. We also characterize the … gains from making a credible commitment to fight inflation. In contrast to conventional wisdom, we show that gains from …

Policy rules that are consistent with inflation targeting are examined in a small macroeconomic model of the US economy … implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that … inflation forecasts are central for good policy rules under inflation targeting. Some simple instrument and targeting rules do …

This paper studies the implications of central bank credibility for long-run inflation and inflation dynamics. We … competitive firms. Inflation is driven by the interaction of lack of commitment and the economic environment. We show that long …-run inflation increases following an unanticipated permanent increase in the labor wedge or decrease in the elasticity of …