The so-called P* model is frequently used or referred to in discussions of monetary targeting. This gives the impression that the P* model might provide some rationale for monetary targeting or for the monetary reference value used by the Eurosystem. The P* model implies that inflation is...

The paper discusses several issues related to how monetary policy should be conducted in an era of price stability. Low inflation (with base drift in the price level) and price-level stability (without such base drift) are compared, and a suitable loss function (corresponding to flexible...

This paper discusses how price stability can be defined and how price stability can be maintained in practice. Some lessons for the Eurosystem are also considered. With regard to defining price stability, the choice between price-level stability and low (including zero) inflation and the...