This paper studies an advantage of commitment over discretion when a central bankobserves only noisy measures of current inflation and output, in the context of an optimizingmodel with nominal-price stickiness. Under a commitment regime, if current policy turns outto be too expansionary...

This study analyzes a two-country dynamic general equilibrium model with nominal rigidities,monopolistic competition and producer currency pricing. A quadratic approximation to the utility ofthe consumers is derived and assumed as the policy objective function of the policymakers.It is shown...

[...]In my view, a goal of price stability requires thatmonetary policy be oriented beyond the horizon of itsimmediate impact on inflation and the economy. Thisimmediate horizon is on the order of two to three years.This orientation properly puts the focus of a forwardlookingpolicy on the time...

[...]The first intellectual development challenging the use ofan activist monetary policy to stimulate output and reduceunemployment is the finding, most forcefully articulatedby Milton Friedman, that the effects of monetary policyhave long and variable lags.1 The uncertainty of the timingand...

[...]Inflation targeting in New Zealand followed legislationthat mandated a Policy Targets Agreement (PTA)between the elected government and the newlyindependent central bank, which resulted in a jointlydecided numerical target for inflation.[...]

[...]Inflation targeting in Canada was not the result oflegislation. However, as in New Zealand, the inflationtarget in Canada is jointly determined and announcedby both the government and the central bank.[...]

[...]Like the other countries examined, the United Kingdomadopted inflation targets after a successful disinflation.Unlike these countries, however, the UnitedKingdom took this step in the aftermath of a foreignexchange rate crisis in order to restore a nominalanchor and to lock in past...

The volatility of real GDP growth in the United States hasfallen by half since the early 1980s relative to the priorpostwar experience.1 Inflation also stabilized around then(although only when compared with a shorter period ofvolatility in the 1970s). Some studies have argued that animprovement...

[...]This article provides a systematic evaluation of severalproposed measures of U.S. core inflation: the popular ex foodand energy series, an ex energy series, a weighted median series,and an exponentially smoothed series. To inform the currentdebate on this issue, we adopt a general framework...