In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize … is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting … headline inflation, assigns zero weight to import prices …

solutions such as the conservative central banker and optimal inflation contracts. Our theoretical model also shows how an … inflation targeting range should be set and how it should respond to changes in the nature of shocks to the economy …

In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating … stabilize price movements in the flexible price sector. Also, in the presence of financial frictions, stabilizing core inflation … frictions a welfare-maximizing central bank should adopt flexible headline inflation targeting--a target based on headline …

central banks to control inflation within their borders, at least in the absence of coordination of policy with other central … the ability of monetary policy to control inflation: by making liquidity premia a function of "global liquidity" rather … to control the dynamics of inflation …

inflation target. The first two strategies restore the Taylor principle as a sufficient condition for stabilizing expectations …. In contrast, in economies with persistent shocks, communicating the inflation target fails to protect against … policy strategy: announcing an inflation target is not enough to stabilize expectations -- one must also announce how this …

This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of … the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this …

focusing inflation targeting that is implemented by a Taylor type rule, a rule that in equilibrium is reflected in the exchange … monetary can't deliver a stationary domestic price level. Another feature in the data for inflation targeting countries that is … direction from PPP in response to an 'inflation' shock - the 'bad news god news' result of Clarida -Waldman (2008;2014). This is …

Should central banks, because of the zero-lower-bound problem, raise their inflation-rate targets? Several arguments … are relevant. (1) In the absence of the ZLB, the optimal steady-state inflation rate, according to standard New Keynesian … currency is feasible (even arguably attractive) and would remove the ZLB constraint on policy. (5) Increasing target inflation …

An important input to monetary policymaking is estimating the current level of inflation. This paper examines … empirically whether the measurement of trend inflation can be improved by using disaggregated data on sectoral inflation to … construct indexes akin to core inflation, but with time-varying distributed lags of weights, where the sectoral weight depends …