learning and misperceptions of natural rates call for more aggressive responses to inflation that would be optimal under …

natural rate and large real-time errors in estimates of the natural rate uprooted heretofore quiescent inflation expectations … and destabilized the economy. Had monetary policy reacted less aggressively to perceived unemployment gaps, inflation … activist policies would have been more effective at stabilizing {\it both} inflation and unemployment. We argue that …

. I find that by reacting strongly to private agents' expected inflation, a central bank would increase the speed of …

In this paper, I consider a simple model in which agents learn about the inflation target of a central bank over time … by observing the policy instrument or inflation outcomes. Measuring credibility as the distance between the perceived … consistent with attaining the inflation target closer to that required to attain the output target. In this model, the crucial …

regimes leads to more aggressive policy reactions with respect to inflation and the second lag of the real exchange rate; and …

We argue that inflation-targeting strategy in practice can be approximated with the interest rate responding to the … unchanged-interest-rate forecast of inflation. We develop a method to derive unchanged-interest-rate forecasts in forward … policy if the central bank attaches sufficient weight to inflation as opposed to output gap stabilization. The optimal …