At a time when past rules of thumb seem inadequate, the author briefly reviews the connection between money and prices.

An argument that attempting to alleviate the burden of unemployment on the less affluent through expansionary monetary policy may hurt the clientele it is supposed to serve if, ultimately, the policy leads to higher long-run rates of inflation.

Since the early 1990s, a number of central banks have adopted numerical inflation targets as a guide for monetary policy. The targets are intended to help central banks achieve and maintain price stability by specifying an explicit goal for monetary policy based on a given time path for a...

A central tenet of inflation targeting is that establishing and maintaining well-anchored inflation expectations are essential. In this paper, we reexamine the role of key elements of the inflation targeting framework towards this end, in the context of an economy where economic agents have an...

This paper considers the joint problem of model estimation and implementation of monetary policy in the face of uncertainty regarding the process of structural change in the economy. I model unobserved structural change through time variation in the natural rates of interest and unemployment. I...

The "unemployment gap" is an important factor in monetary policy decisions. But the size of the gap depends on the level of natural rate of unemployment, which is inherently unobservable. The uncertainty surrounding estimates of the natural rate, and the costs of mismeasuring it, may recommend a...

An examination of the short- and long-term implications of an inflation policy on real output, using a method that allows structural interpretation of a simple VAR applied to a macroeconomic system that includes real output and inflation.

What rule should a central bank interested in inflation stability follow? Because monetary policy tends to work with lags, it is tempting to use inflation forecasts to generate policy advice. This article, however, suggests that the use of forecasts to drive policy is potentially destabilizing....

In October 2008 the Federal Reserve began paying banks interest on the reserves they hold. This action was intended to remove the implicit, distortionary tax that reserve requirements impose on banks, as well as help the Fed maintain the fed funds rate at its target. Going forward, interest on...

Policymakers look to the output gap as a measure of how the economy is performing. However, different methods of computing the output gap can lead to vastly different results, rendering it a potentially poor guide.