Forecast targeting is an innovation in central banking that represents an important step toward more rule-based policymaking, even if it is not an attempt to follow a policy rule of any of the types that have received primary attention in the theoretical literature on optimal monetary policy....

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 compares nominal income and monetary targets in a standard aggregate demand - aggregate supply framework. If the desirability of policies is measured by their effect on the unconditional variance of output, nominal income targeting is preferable if and only if the aggregate elasticity...

This paper develops an analytical framework for the analysis of targeting rules for monetary policy. We derive the optimal money supply rule and analyze the implications of other monetary rules including rules that target nominal GNP, the price level, the monetary growth rate and the...

In this paper we calculate robustly optimal monetary policy rules for several variants of a simple optimizing model of the monetary transmission mechanism with sticky prices and/or wages. We discuss representations of optimal policy both in terms of interest-rate feedback rules that generalize...

This paper characterizes the properties of various interest-rate rules in a basic forward-looking model. We compare simple Taylor rules and rules that respond to price-level fluctuations (called Wicksellian rules). We argue that by introducing an appropriate amount of history dependence in...

This paper proposes a general method for deriving an optimal monetary policy rule in the case of a dynamic linear rational-expectations model and a quadratic objective function for policy. A commitment to a rule of the type proposed results in a determinate equilibrium in which the responses to...

This paper examines the choice of a monetary-policy rule in a simple macroeconomic model. In a closed economy, the 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...

This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation...

This paper identifies optimal interest-rate rules within a rich, dynamic, general equilibrium model that has been shown to account well for observed aggregate dynamics in the postwar United States. We perform policy evaluations based on second-order accurate approximations to conditional and...