inflation uncertainty strongly predicts a more hawkish policy stance that is not explained either by the Fed's macroeconomic … forecasts or by public uncertainty proxies. We rationalize these results with a model of inflation tail risks and argue that the … effect of uncertainty on the FOMC's decisions reflects policymakers' concern with maintaining credibility for the inflation …

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 inflation targeting) is discussed, including the index and level for the inflation … price stability. The benefits of credibility (private inflation expectations coinciding with the inflation target) are …

monetary policymaking. First, we discuss why trimmed means provide the best measure of core inflation. Second, we outline how … rigidities impede policymakers' ability to control inflation. And third, we describe how alternative shock/rigidity combinations … create inflation's grease (whereby it improves economic efficiency by speeding adjustment) and sand effects (whereby it …

inflation expectations. We develop this measure using assumptions common in economic analysis of open economies. Using quarterly …

on a threshold rate of inflation. A number of policy options are discussed to address the issue of price inertia which …

people observe low inflation, they raise the possibility that the policymaker is committed to low inflation (type 1). This … equilibrium the policymaker of type 1 delivers surprisingly low inflation -- with corresponding costs to the economy -- over an … extended interval. The type 2 person mimics this outcome for awhile, but shift seventually to high inflation. This high …

inflation, and that the optimal monetary policy is that which maximizes real balances. We also show that the real rate of … interest is not invariant to monetary policy: inflation lowers the real rate …

Inflationary finance involves first, the tax on cash balances from expected inflation, and second, a capital levy from … unexpected inflation. From the standpoint of minimizing distortions, these capital levies are attractive, ex post, to the …