In this paper, we test whether public preferences for price stability (obtained from the Eurobarometer survey) were actually reflected in the interest rates set by eight central banks. We estimate augmented Taylor (1993) rules for the period 1976Q2–1994Q1 using the dynamic GMM estimator. We...

During the summer of 2009, Belgium and the euro area, as well as other industrialised countries, recorded negative inflation rates. Although they were the direct result of sharply falling commodity prices in the second half of 2008, policy-makers and the general public wondered whether this...

In the wake of the two longer-term refinancing operations with a maturity of three years conducted in December 2011 and February 2012, amounts placed on the Eurosystem’s deposit facility surged to unprecedented high levels of around € 800 billion. The article clarifies how this high recourse...

In a simple New Keynesian model, we derive a closed form solution for the inflation-gap persistence parameter as a function of the policy weights in the central bank’s Taylor rule. By estimating the time-varying weights that the FED attaches to inflation and the output gap, we show that the...

We examine inflation and uncertainty in the UK with a version of the Markov Switching model, which allows for changes in the variance as well as in the mean and persistence of a series. We find that the UK’s attempts at exchange rate pegs in the form of shadowing the deutschmark and entering...

The article examines the link between monetary policy and financial stability in the context of the recent financial and economic crisis. It aims to draw lessons from those recent events and to examine the implications for monetary policy. More specifically, it asks whether, apart from its price...

When present and past policy is used to learn about policymaking and predict future policy, central banks can exploit this to influence expectations and thereby improve policy without making any commitments. In a sticky-information model of the inflation-output trade-off, we show how the optimal...

In a standard New-Keynesian sticky-price model, we study how the gains from commitment depend on how far ahead policymakers commit. While the traditional time-inconsistent solution assumes a once-and-for-all commitment to a plan for all future periods, we show that most of the gains can be...

The main objective of the study is to provide a theoretical analysis of optimal monetary policy in a small open economy where households set real wage in a staggered fashion. The introduction of real wage rigidities plays a important role to resolve main shortcomings of the standard new...

Globalisation, which has been accelerating since the mid nineties, has triggered important economic changes. The article deals with three possible consequences of globalisation which might be relevant for monetary policy. Possible implications for the conduct of monetary policy are also...