This paper identifies optimal policy rules in the presence of explicit targets for both the inflation rate and public debt. This issue is investigated in the context of a dynamic stochastic general equilibrium model that describes a small open economy with capital accumulation, distortionary...

In inflation targeting (IT) regimes, the Monetary Authority announces an explicit objective, the target for inflation. However, other objectives that possibly conflict with the inflation goal are present, such as keeping output close to its potential level and the stability of financial markets....

The concept of trend inflation is important in making accurate inflation forecasts. However, there is little consensus on how the trend in inflation should be modeled. While some studies suggest a survey-based measure of long-run inflation expectations as a good empirical proxy for trend...

This paper studies the time variation of the Federal Reserve’s inflation target between 1960 and 2004 using both macro and yield curve data. I estimate a New Keynesian dynamic stochastic general equilibrium model in which the inflation target follows a random-walk process. I compare estimation...

This paper studies monetary and fiscal policy rules, and investigates the characteristics of optimal policies. The central focus of the paper is on the comparison of two types of fiscal rules: a balanced budget and a target for the primary surplus. Balanced budget rules (or, more generally,...

This paper studies the international transmission of anticipated inflation. A two-country, two-good, two-currency, cash-in-advance model is used to examine analytically and numerically the consequences of changes in a country's inflation rate. Domestic monetary policy influences real activity at...

Monthly CPI inflation rates can be spuriously choppy when constructed using the official CPI, rebased with 1982-84=100. The problem can be traced to rounding that occurs when only one digit after the decimal place is reported in rebased CPI data. This paper compares three CPI measures to...