The paper discusses the choice between inflation targeting and monetary targeting as a strategy for the Eurosystem, the actual strategy the Eurosystem announced in the fall of 1998, the framework for policy decisions appropriate for achieving the goals of the Eurosystem, the role of exchange...

This paper explores several issues concerning a possible zero lower bound (ZLB) including its theoretical rationale; the magnitude of effects of low sustained inflation on real interest rates; the validity of analyzing monetary policy in models with no monetary variables; and the dynamic...

This paper reviews the recent literature on monetary policy rules. We exploit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy...

Undesirable real effects have been attributed to floating exchange rates in general, and the 1980-83 appreciation of the dollar in particular.In the appreciating country, the U.S., export industries lose competitiveness and so output falls. In the other country, say Europe, the exchange rate...

When the goals of internal and external macroeconomic equilibrium are in conflict, sterilized intervention in the foreign exchange market may provide an independent policy instrument through which the central bank can resolve its dilemma in the short run. This paper is concerned with the West...

The paper investigates the process of inflation stabilization under conditions of international capital mobility. A first part looks at the traditional view of inflation and payments problems as a reflection of fiscal problems and deficit finance. From there the analysis proceeds to the...

This paper examines the relationship between macroeconomic objectives of controlling inflation and trade-regime objectives in stabilization programs of developing countries. It is seen that there need be, in principle, no close relationship between the two, as a crawling peg exchange-rate policy...

This paper investigates the adjustment process to a reduction in the rate of credit creation in an open, flexible exchange rate economy. The framework of analysis is one of rational expectations with respect to interest rates, inflation and depreciation. The special feature of the model is the...

Inflation targeting is a monetary-policy strategy that is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has been called forecast targeting, and a high degree of transparency and accountability....

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...