This paper deals with the relationship between inflation targeting and exchange rates. I address three specific issues …: first, I analyze the effectiveness of nominal exchange rates as shock absorbers in countries with inflation targeting. This … volatility is different in countries with an inflation targeting regime than in countries with alternative monetary policy …

Policy rules that are consistent with inflation targeting are examined in a small macroeconomic model of the US economy … implicit instrument rules, may be closer to actual operating procedures of inflation-targeting central banks. We find that … inflation forecasts are central for good policy rules under inflation targeting. Some simple instrument and targeting rules do …

optimal policy is a output and inflation. In an open economy, the optimal rule changes in two ways. First, the policy … instrument is a Conditions Index the exchange rate. Second, on the right side of the rule, inflation is replaced by filters out … the transitory effects of exchange-rate movements. The model also implies that pure inflation targeting is dangerous in an …

. Quantitative goals take three forms: exchange rates, money growth rates, and inflation targets. We analyze the effects on inflation … determinants of inflation (such as fiscal policy, the business cycle, and openness to international trade), and the endogeneity of … systematically and robustly associated with lower inflation. The exact form of the monetary target matters somewhat, but is less …