The standard result in models of sticky prices is that an inflation rate target is better than a price level target at minimizing the variance of real output. This paper provides a contradictory result: a price level target may be preferred in an economy that is characterized by flexible prices...

This article formulates and tests for New Zealand a model of exchange rate determination focusing on non-tradeable goods and terms-of-trade shifts. We emphasize the equilibrium properties of this framework and, in this context, estimate an error correction model where adjustment in response to...