This paper explores issues that arise in implementing monetary policy under conditions of sustained price stability. We discuss several issues that concern the selection of a central bank's inflation objective under such conditions: price measurement; the behavior of other key variables,...

This paper describes research comparing the response of inflation to changes in exchange rate competitiveness in various regions of the world. The paper first presents evidence that an empirical relationship between the rate of inflation and the level of the real exchange rate, which was...

This paper provides an evaluation of the effectiveness of inflation targeting in four industrial countries --New Zealand, Canada, the United Kingdom, and Sweden --focussing on the recent period of economic recovery. Evidence drawn from fmancial market data suggests that credibility of their...

Considerable research has focused on explaining why currencies appreciate in real terms after the nominal exchange rate is stabilized, but this research generally has taken a theoretical approach, and rarely has tested its hypotheses empirically. In this paper I estimate a simple...

Ramsey models of fiscal and monetary policy with perfectly-competitive product markets and a fixed supply of capital predict highly volatile inflation with no serial correlation. In this paper, we show that an otherwise-standard Ramsey model that incorporates capital accumulation and habit...

Inflation targeting (IT)--a policy framework that directly targets an explicit inflation goal--has gained widespread attention recently as it has been adopted by several OECD countries. There is a growing body of literature on the ultimate long-term benefits of price stability and on theoretical...

This paper develops an empirically constant, data-coherent, error cor­rection model for inflation in Australia. The level of consumer prices is a mark-up over domestic and import costs, with adjustments for dynamics and relative aggregate demand. We address issues of cointegration, general to...

Cross-country regressions explaining output growth often obtain a negative effect from inflation. However, that result is not robust, due to the selection of countries in sample, temporal aggregation, and omission of consequential variables in levels. This paper demonstrates some implications of...

We demonstrate the existence of a monetary policy tradeoff between price-inflation variability and output-gap variability in an optimizing-agent model with staggered nominal wage and price contracts. This variance tradeoff is absent only in the special case in which prices are sticky and wages...

Was the high inflation of the 1970s mostly due to incomplete information about the structure of the economy (an unavoidable mistake as suggested by Orphanides, 2000)? Or, to weak reaction to expected inflation and/or excessive policy activism that led to indeterminacies (a policy mistake, a...