When a central bank operates with multiple, non-nested models of the economy, generally no single policy rule will be optimal across within alternate models. In this context, Levin and Williams (2003) introduce the notion of fault tolerance of policy rules, that is, the performance of policy...

For policymakers, thinking about best practice monetary policy means thinking about uncertainty. Open economy monetary policymakers face an additional source of uncertainty – exchange rate dynamics. This paper identifies policy rules robust to the open economy inflation targeters face in...

This report analyses some of the reasons mentioned in the literature as to why central banks change interest rates at discrete intervals in the face of a continuously changing environment (interest rate stepping) and why they seem to prefer to implement changes in a series of small steps...

This paper analyses the optimal degree of flexibility under a Lucas type convex Phillipscurve. As a benchmark, we first analyse optimal monetary policy with a linear Phillipscurve and persistent cost-push shocks. As in Svensson (1997a), a central banker who possesses private information and who...