situation poses to price stability. We propose to regard the central banker as a risk manager who aims to contain inflation …

the absence of entry. Specifically, a long-run positive (negative) rate of inflation is optimal when the benefit of … by the desired markup. Plausible preference specifications and parameter values justify a long-run inflation rate of two …

, one finds that an allocation in which the producer inflation rates in both countries are stabilized to zero reproduces the … a permanent shift in steady-state consumption. A state-contingent producer inflation policy is the feasible first …

The paper examines inflation targeting in a small open economy with forward-looking aggregate supply and demand with … and flexible targeting of CPI and domestic inflation and inflation-targeting reaction functions and the Taylor rule …. Flexible CPI-inflation targeting does not only limit the variability of CPI inflation but also the variability of the output …

Price-level targeting (without base drift) and inflation targeting (with base drift) are compared under commitment and … discretion, with persistence in unemployment. Price-level targeting is often said to imply more short-run inflation variability … and thereby more employment variability than inflation targeting. Counter to this conventional wisdom, under discretion a …

inflation rates as low as 2%. The effects of the constraint are, however, non-linear with respect to the inflation target and … variability of output increases significantly and that of inflation also rises somewhat. Also, we show that the asymmetry of the … short of potential with lower inflation targets. …

-maximizing interest rate rules. The main finding of our analysis is that strict inflation stabilization is a robust optimal monetary … behaviour of inflation relative to its credit-frictionless level. Thus neither economy, despite yielding different inflation and …