We study how changes in the value of the steady-state real interest rate affect the optimal inflation target, both in the U.S. and the euro area, using an estimated New Keynesian DSGE model that incorporates the zero (or effective) lower bound on the nominal interest rate. We find that this...

In this paper, we empirically examine the effect of inflation targeting on the exchange rate pass-through to prices in emerging countries. We use a panel VAR that allows us to use a large dataset on twenty-seven emerging countries (fifteen inflation targeters and twelve inflation nontargeters)....

Using micro price data underlying the Harmonized Index of Consumer Prices in France, Germany and Italy, we estimate relative price trends over the product life cycle and show that minimizing price and mark-up distortions in the presence of these trends requires targeting a significantly positive...

Euro area countries as a whole have experienced a marked downward trend over the 1980s. Over this period, the unemployment rate has increased and economic activity has been sluggish. Changes in the implicit inflation target, viewed as low frequency movements of inflation, might possibly explain...

The Euro area as a whole has experienced a marked downward trend in inflation over the past decades and, concomitantly, a protracted period of depressed activity. Can permanent and gradual shifts in monetary policy be held responsible for these dynamics? To answer this question, we embed...

We study the characteristics of inflation targeting as a shock absorber in response to large shocks in the form of natural disasters for a sample of 76 countries over the period 1970-2015. We find that inflation targeting improves macroeconomic performance following such shocks as it lowers...

The recent boom in housing markets of most developed economies has spurred criticism that inflation targeting central banks may have neglected the build-up of financial imbalances. This paper provides a formal empirical test of such claims, using a standard program evaluation methodology to...

This paper examines whether reputation concerns can induce the central bank to implement the time-inconsistent optimal monetary policy in a standard New Keynesian model. The forward-looking nature of this model is in this respect interesting on two accounts: first, it worsens the...

We use high-frequency intraday interest rate data to measure euro area monetary policy shocks on the days of ECB interest rate announcements between 2002 and 2013. In line with Gürkaynak et al. (2005), we look at monetary policy shocks along two time dimensions: one related to the current level...

This paper focuses on the price stability objective within the framework of the single monetary policy strategy. It starts by reviewing what this objective, which is common to all central banks, means. Secondly, this paper will focus exclusively on the anchoring of short- to medium-term...