inflation and staggered prices. An implication of the negative welfare consequences of a well informed public is that central …

conventional wisdom, it is found that price-level targeting leads to a better trade-off between inflation and output …-gap variability than inflation targeting, when the central bank acts under discretion. In some cases, price-level targeting under … dircretion results in the same equilibrium as inflation targeting under commitment. …

The central bank's optimal reaction to foreign and domestic shocks is analyzed in an inflation targeting model allowing … that the interest rate response to foreign shocks is smaller when pass-through is low. Second, the inflation …

other reaction coefficients, on inflation and output, are sub-optimal. However, an indirect exchange rate response, through … a policy reaction to Consumer Price Index (CPI) inflation rather than to domestic inflation, is welfare enhancing. This … result is independent of whether society values domestic or CPI inflation stabilization. …